The risk of dependence on foreign workers

Official statistics, made available by the Ministry for Social Justice and Solidarity, have shown that 76,866 foreign workers and self-employed persons paid a staggering €168 million in social security contributions in 2019.

This represented an increase of nearly €30 million over that paid in 2018 by 65,092 foreign contributors. A comparison with previous years shows an increase of a whopping €89 million since 2017: while the number of Maltese contributors only increased by 899 between 2018 and 2019, the number of foreign contributors shot up by 11,774 in the same timeframe.

But while this monetary contribution underlines the positive economic contribution of foreign workers, it also exposes the vulnerabilities of the Maltese economic and social model.

On one hand, the influx of younger migrants has helped Malta defy a European-wide trend, which sees an increasingly ageing workforce. Moreover, the influx of foreign workers was always seen as a way of boosting the pension system.

But the reliance on foreign workers has also exposed a risk of dependence, and making the country complacent in addressing structural weaknesses. As former Prime Minister Alfred Sant asked in September 2018 “Does [the influx of foreigners] mean that this country will end up like an Arab Gulf state, which depends on transitory human resources to fuel economic surges whose final outcome is unknown?”

One other question is: are we investing the dividends from the current economic boom in the sustainability of our pension system? Malta still lacks a mandatory second pillar.  Surely, imposing such a measure in a context of low wages in a number of sectors could further dilute incomes of low-income earners.

By banking on increasing the number of contributors, through greater female participation and the increase in foreign workers, the current administration has managed to avoid this.  But a second pillar can serve as a potentially important supplement to increase and diversify retirement incomes, provide a pool of savings to invest in national development and to relieve some of the pressure on the real estate market as the main vehicle to invest towards retirement.

There are also social implications of this influx, which can no longer be ignored.  While foreigners do occupy niches in the economy and its health infrastructure, where not enough Maltese workers are found, Malta has also attracted a large number of foreigners in construction and in new services jobs required to sustain a growing population.  In this way, the logic of accelerated economic growth is in itself dictating the transformation of the very fabric of Maltese life.  For this sudden influx of 76,866 workers has happened of over the span of a decade, in the absence of any long-term plan on how to sustain and nurture the influx.

This comes with a number of positives in terms of enriching Malta’s pool of talent, cultural diversity and possibly a welcome redefinition of Maltese identity.  But it also increases pressure on the infrastructure, creates a demand for more housing and increases upward pressures on rents (both by high paid foreigners who can afford higher rents and lowly paid workers who are more likely to live to share costs in larger groups) and on wages.

That said, it is our failure to regulate planning and improve wages which is creating these social problems.

Although a large number of foreign workers come here as temporary guests with little intention of staying on, it is inevitable that a significant portion develops an attachment to Malta and its inhabitants. We should therefore be wary of seeing migrants simply as a source of income, cheap labour and a boost to our pension system.   

Moreover, while many take comfort in the fact that, unlike irregular immigrants, most foreign workers are here to stay for a short while, it is this category which can be most disruptive to the social fabric lacking a sense of belonging which comes with a desire to stay. Thousands are bound to stay here for decades, with some building a family here:  which means that there will be growing demands for political rights and an easier path for citizenship through naturalization.

For liberal democracy itself is based on the notion of no taxation without representation. The contribution of these foreigners naturally entitles them to political and social rights as well as obligations. This is why Malta urgently needs an integration policy: just a token acknowledgement, but a principle which underlies the whole action of government.

For as the COVID experience has shown, ‘team Malta’ is more diverse than ever.