Increase in foreign workers: It’s not the young leaving; it’s rapid economic growth

A new Central Bank of Malta study has challenged claims that young Maltese are emigrating in large numbers or that public sector employment is forcing private employers to rely on foreign labour.

While some have suggested that young Maltese workers are leaving the country, contributing to a decline in the native workforce, the report found that Malta continues to experience a net inflow of its own citizens.

In 2023, 2,256 Maltese citizens returned to the country, while only 1,767 emigrated. The latest data shows that the number of young Maltese emigrating has sharply declined – from 828 in 2012 to just 194 in 2022.

At the same time, the number of young Maltese returning home has remained relatively stable, leading to a net positive migration trend among this demographic. The study also cites Eurofound research indicating that only 21% of young Maltese plan to emigrate, below the EU average of 23% and significantly lower than the 50% figure for Cyprus.

Public sector growth not driving foreign labour demand

Another widespread belief is that increased employment in the public sector has created a need for more foreign workers in other sectors. However, while the number of public sector employees grew from 46,000 in 2013 to just over 55,000 in 2023, the sector’s share of total employment actually fell from around 25% to under 20%.

The study noted that more than 40% of public sector job growth was in education and healthcare, areas driven by rising demand for services rather than artificial job creation. Furthermore, the number of foreign nationals employed in the public sector increased from 705 in 2013 to 1,803 in 2023, accounting for 12% of the overall rise in public employment. The report concludes that even if the public sector workforce had remained frozen at 2013 levels, the reduction in foreign worker inflows would have been negligible.

The real driver: rapid economic growth

The study explained that the growing demand for foreign labour is mainly due to Malta’s fast-growing economy. Between 2013 and 2023, the economy nearly doubled. Manufacturing grew modestly (€1 billion to €1.1 billion), while IT and consultancy quadrupled to €1.4 billion. Professional, scientific, and technical activities tripled, surpassing retail and tourism.

Sectors that expanded the most, such as construction (3% of economic growth) and remote gaming (three times that), required workers with specialised skills that the domestic labour market struggled to provide.

The largest increase in foreign workers occurred in retail, transport, accommodation, and food services, where Maltese employment fell by 2,751, while foreign employment grew by over 30,000.

In contrast, professional services saw an increase in both Maltese (+15,000) and foreign (+24,500) workers.

How have Maltese workers adapted?

Despite the growth in foreign employment, the number of Maltese workers also increased significantly. Between 2013 and 2023, the number of employed Maltese citizens rose by more than 30,000 – the largest increase in a decade, compared to just 9,000 in the previous decade.

Labour force growth was driven by rising participation among women and older workers. Female employment rose by 25%, while the number of older workers more than doubled. In 2013, workers above pension age made up 6% of the Maltese workforce; by 2023, this rose to 11%.

However, Malta’s working-age population declined by 6.2% over the decade due to ageing. While policies like raising the pension age helped mitigate this, the study suggests further human capital investment is needed to sustain long-term labour supply.

The report also highlighted the impact of free childcare, introduced in 2014. Before this reform, women’s employment rates dipped between childbirth and kindergarten entry. The change helped close this gap, with 6,200 more Maltese women in employment than if pre-2014 trends had continued.

Social benefit tapering, introduced in 2014, also boosted the labour supply by 5,300 workers, with women making up 70% of beneficiaries. Pension reforms in 2017 incentivised later retirement by offering a pension top-up for those working beyond 61, encouraging older workers to stay employed.

The changing face of the job market

Between 2013 and 2023, Malta’s workforce grew from 190,000 to 317,000. Foreign working-age men increased by nearly 63,500, while foreign women rose by 37,000.

Sectoral trends show that Maltese workers have moved towards higher-paying industries such as public administration, education, healthcare, financial services, and IT.

Meanwhile, construction, manufacturing, tourism, and retail increasingly rely on foreign labour. Foreign nationals accounted for 75% of total employment growth since 2013. Foreign working-age men increased by nearly 63,500, while Maltese men below pension age rose by only 2,000.

The report also acknowledged concerns regarding the rapid growth of foreign employment and Malta’s economic model. It suggested broadening human capital investment beyond academic education and increasing older worker participation through lifelong learning.

The study was carried out by Aaron G. Grech, Chief Officer of the Economics Division at the Central Bank of Malta.