The way forward

A discussion paper recently published by the Central Bank of Malta (CBM), “The Length of Stay of Foreign Workers in Malta: an update” (DP/05/2025), provides a detailed assessment of the highly transient nature of Malta’s foreign workforce and underscores the subsequent challenge this poses to long-term labour market stability and productivity growth. The paper, authored by Ian Borg, updates prior research by extending the dataset to 2023 and refining the methodology using the Mean Residual Life Function (MRLF).

The study confirms that while Malta has succeeded in attracting a substantial inflow of foreign workers, retention remains a significant issue. The results suggest that the foreign labour force is highly transient. Key findings include:

• High Turnover Rates: Nearly one-third of foreign workers exit Malta within their first year of engagement. This proportion increases to approximately 51% within three years.
• Median Stay: The median length of stay across the 2002–2023 period is estimated at three years.
• Short-Term Exits: Around 10% of all foreign workers left the Maltese labour market within just three months of engagement, rising to 19% within six months.
• Differences by Origin: European Union (EU) nationals are generally more mobile than third-country nationals (TCNs), reflecting the benefits of free movement. For EU nationals, almost 15% left within the first three months, and about a quarter departed within six months. However, TCN retention is also low, with roughly a quarter leaving within their first year, and retention declining in recent years.
• Other Factors: Younger cohorts (under 25) display the shortest stays. Managers tend to remain the longest, while clerical and service workers typically have the shortest stays. Retention is longer in health, education, and administrative support sectors, and longer in micro-enterprises compared to large companies.

The Central Bank of Malta (CBM) discussion paper also provides a breakdown of retention patterns by economic sector for Third-Country Nationals (TCNs) based on their median length of stay.

The sectors exhibiting the lowest turnover (highest median length of stay) for TCNs are the ‘Other’ category (which includes Agriculture, Forestry and Fishing, Mining and Quarrying, Real Estate, and certain service activities) at 3.7 years, the Administrative and Support Sectors at 3.6 years and the Public, Health, and Education sectors at 3.6 years. On the other hand, the sectors demonstrating the highest turnover (shortest median length of stay) for TCNs are the Arts and Entertainment sector, with a median length of stay of 2.9 years and the Manufacturing, Electricity, and Water sectors, with a median length of stay of 3.0 years. It is important to note that generally, the variance in the length of stay across sectors is notably smaller for TCNs compared to EU nationals. Even the sectors with the lowest retention rates for TCNs are still considered “very close to the overall median length of stay of 3.0 years”

However, the high turnover rates are seen as structurally challenging, undermining the benefits of “learning by doing,” as foreign workers often leave before acquiring skills translate fully into productivity gains for the economy. This dynamic forces Maltese firms to continuously recruit foreign labour, hindering cumulative gains from on-the-job learning at the macroeconomic level.

The CBM discussion paper establishes that Malta’s reliance on a highly transient foreign workforce severely limits productivity growth due to high labour turnover. This shows the importance of what was announced in Budget 2026, whereby various initiatives where outlined at accelerating the needed investments in digitalisation and technology aimed at increasing efficiency and productivity, thereby reducing the structural dependence on a constantly circulating, short-term labour supply.

Budget 2026 specifically states that enhanced technology adoption is necessary to make Malta “future-proof” and achieve a resilient, intelligent, and competitive economy. Form the various measures outlined there are

This link is solidified by several key digitalisation initiatives in Budget 2026, including the accelerated two-year tax reduction for investments related to AI, digitalisation, modernisation, automation, and cybersecurity, whereby companies can claim a significant 175% tax reduction on eligible expenditure in Research and Innovation (R&I), urging them to consistently invest in technology and expertise, the increased support for SMEs whereby the Micro Invest scheme is being strengthened to specifically include investment in digital solutions, with the the maximum tax credits being increased to €65,000 (up to 65% of eligible costs). Additionally, a new scheme offers a 60% tax credit over four years for capital investments in machinery, IT software, and cybersecurity solutions, aimed at boosting productivity and added value.

This is the way forward for Malta. By focusing on boosting productivity through technology, we need to have Malta be less reliant on continuous, costly inflows of transient foreign labour and instead support a more stable, higher-skilled, and retained workforce.