City Centre project to increase demand for foreign workers

Project will ‘stabilise’ wages in hospitality and retail while pushing up wages at higher end

During construction the project will require an average of 940 workers each month
During construction the project will require an average of 940 workers each month

Malta’s labour market is not yet in a position to sufficiently provide for the demand for labour that could be generated by the City Centre high-rise project on St George’s Bay.

An Economic Impact Assessment conducted by KPMG states that a “number of employees will be sourced from abroad”.

The City Centre project at Pembroke, set on the former site of the Institute for Tourism Studies, will comprise a 464-room five-star hotel, 162 luxury apartments inside a 37-storey tower, commercial office space, a shopping mall and a casino.

The project is expected to create over 1,600 new employment opportunities within a number of sectors including the hospitality, gaming and retail sectors. During construction the project will require an average of 940 workers each month.

While the project may create opportunities for Maltese workers it is also expected to attract more foreign workers to Malta, “particularly EU nationals originating from countries that are currently experiencing an economic slowdown”, KPMG said in its report.

The project is also expected to push wages for skilled and professional work upwards. The increase in demand for skilled labour will push up the wage bill for this type of labour, because specialised and professional skilled labour is limited in its supply and a higher demand for such labour would push up salaries.  “This may result in a cost-push inflationary spiral, leading to an increase in the price of other goods and services in other sectors of the economy.”

But the project is not expected to push wages in the hospitality sector upwards.

Instead the increase in demand for unskilled labour is expected to “stabilise” wages in a sector  where wages  are described as “typically sticky” – a term used by economists to refer to a situation where workers’ earnings don’t adjust quickly enough to changes in labour market conditions.

“As wages are typically sticky, an increase in unskilled labour supply may result in a stabilisation of salaries particularly in the retail and hospitality industries.”

The project is expected to employ a number of unskilled and semi-skilled labour including housekeepers, maintenance workers, waiters and salespersons.

According to the report the increase in foreign workers is expected to have a positive impact on public finances as foreign employees would also pay income tax and National Insurance contributions in Malta.

Malta recently registered the second lowest unemployment rate in the eurozone, with the Czech Republic keeping top billing.

Among EU member states, the lowest unemployment rates in March 2018 were recorded in the Czech Republic (2.2%), Malta (3.3%) and Germany (3.4%).

Immigration has helped accommodate a rising demand for labour in Malta, to the extent that without foreign workers, Malta’s working age population would have declined instead of risen.

Between 2000 and 2014, dependence on foreign workers in elementary occupations and in clerical and support duties rose from 0.5% to 14.1%.

Industry and the public sector are dominated by the Maltese, while foreign workers are more likely to be employed in other services, mainly remote gaming, profes-sional services and administrative support and in tourism. Other foreign workers are also present in ‘other services’ (29% of workforce), 23% in professional services & administrative support, 21% in tourism, 18% in real estate, 16% in information & communication and 13% in construction – according to a 2014 report by the Central Bank.

The same report found that tax revenue from foreign workers rose to 10.1% of some €984 million in 2014, a growth of nine times during the period 2000 to 2014, whereas that from Maltese workers doubled.

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