Employment policy seeks better-skilled workforce but warns foreign labour still needed

A better-skilled Maltese workforce is key to ensure higher incomes for families, a new employment policy says but Malta will continue to need foreign labour.

Unveiled on Tuesday by Finance Minister Clyde Caruana, the policy for the next eight years emphasises the need for workers to be better educated and trained.

But the voluminous report makes it clear that foreign workers will continue to be required to fill gaps created by an aging population that has one of the lowest fertility rates in the EU.

Changing population trends takes time and resources, which is why the demand for foreign workers will remain, Caruana said at a technical briefing for journalists before the policy was launched.

“We have to improve our productivity to reduce demand for more foreign workers, which is one of the policy aims but it is easier said than done because it requires a better-skilled Maltese workforce. This is why the need for importing labour will remain if we are to sustain economic growth levels of recent years,” he said.

Finance and Employment Minister Clyde Caruana

However, the policy does recognise some of the problems created by the exponential growth of the foreign workforce and suggests the creation of an expert group to determine whether migrant workers are truly needed and in which sectors.

“Restricting labour migration programmes to sectors with actual labour shortages will better align the skills of migrant workers with labour market needs and prevent the misuse of the programmes by employers seeking to erode labour standards,” the policy says.

The report recognises that with 77% of those aged between 20 and 64 in work, Malta’s employment ratio was already at par with the EU target set for 2030. This was the result of the employment policy of the past eight years, which sought to attract more people to the labour market through a series of incentives such as free childcare and in-work benefits.

Better skills for better incomes

However, the next challenge is to ensure that Maltese workers have better skills to be able to earn better incomes.

The economic and labour market analysis that accompanies the 40 recommendations listed in the report shows how Malta has among the lowest rates of people who spend time in education across the EU.

A worker spends an average of 16 years in education in Malta, whereas in Ireland the average stands at 20 years, which means people enter the labour market with a more extensive skill set.

Figures show the wide disparity between the income that people with a higher education level receive and earnings of those with low education attainment.

“We have to up the game in education. 20 years ago, when internet was still by dial-up, I was 16 and taking my O Levels and there were around 38% of young people my age who got six O Levels. Today, we have internet everywhere on our mobile phones and the number of students who exit compulsory education with six O Levels is still less than 50%,” Caruana said.

He insisted that education was the key for social mobility and unless young people continued studying they would suffer from poor incomes in the future.

“These words may sound controversial and may not go down well with some politicians and academics but they are facts borne in numbers. It is useless for the country to create modern job opportunities if our students are unable to access them because the option will then be to import foreign labour,” he insisted, adding people also had a responsibility to improve their skills.

Time not ripe for four-day week

Caruana ruled out going for a four-day week at this stage when 28% of workers lack the necessary skills. "I recently heard Josef Vella from the UĦM call for a discussion on a four-day week. I agree but not now. We cannot afford going there now with so many workers lacking skills. We have to work hard to improve the skills level and then we can discuss a four-day week," Caruana said.

The policy also hints at the need to reintroduce trade schools for students who are less academically inclined.

The policy also makes the case for improved productivity and for workers to remain in the labour market beyond retirement age so as to ensure better incomes as pensioners. In this sense, it proposes keeping pensionable income and wages separate for tax purposes.

Policy recommendations include carrying out a national skills census, incentives for retired workers to offer training programmes at their place of work or in trade schools, encourage lifelong learning and upskilling, improve career guidance, support for more flexible and family-friendly working options, tax incentives to encourage continued work after retirement, equivalence of overtime and part-time tax rates to encourage workers to work overtime with their main employer, develop a national economic migration policy, tax credits for creation of green jobs within the company, set up an expert group to determine the true need of migrant workers and in which sectors to ensure foreign labour is imported to address physical shortages and skills shortages.

It also recommends “high quality and timely response” from education and training institutions to future skills requirements.

Economist Stephanie Fabri, who helped compile the policy, said Malta had to invest in education and training to enable workers reach their full potential and encourage firms to engage in research and development, to ensure the country remains competitive.