Why jobs were not shed during crisis

Studies shed light on the reasons Malta did not suffer the same job losses as other countries.

Two reports by the Centre of Labour studies in response to a questionnaire by the European Working Conditions Observatory shed some light on the reasons Malta did not suffer the same job losses as other countries.

While at the peak of the crisis in 2009 job losses in manufacturing sector were avoided thanks to €4.9 million in the form of grants to embattled companies, job losses were avoided subsequently thanks to the resilience of the Maltese economy and employers' willingness to shed profits instead of jobs. But while job losses were avoided, precarious employment also increased, and wages in certain sectors continued to decline right up to 2012.

In fact one of the reasons cited in one of the reports is that that employment retention in Malta is considered to be more cost-effective for employers than job shedding.

This is because of the limited size of the labour market.

"It is simply too costly to make workers redundant and then have to re-train new recruits," a report by Clyde Caruana states.

In addition, entrepreneurs face the risk that their competitors may employ any redundant workers. Therefore, as a result of the economic crisis, the first buffer to plunge is business profits.

Figures indicate that during the economic crisis, profits took about 21 months to recover to pre-crisis levels, whereas wages and salaries reached pre-crisis levels in less than 15 months.

But one key element which saved the day in avoiding job losses was government intervention.

"The Maltese government, rather than offering early retirement schemes to the workers threatened by redundancies, adopted an interventionist policy by giving subsidies to the ailing firms, so as to keep workers at work, thus avoiding the longstanding toll of high joblessness," a report by Saviour Rizzo states.

Many of these firms had to go on a four-day working week. The trade unions representing these workers gave their consent to these measures and to the government's approach.

"Indeed the consensus reached between the social partners to deal with the imminent redundancies in the firms which were severely hit by the crisis can be defined as a social pact at company level."

Increase in part-time work

Eurostat statistics indicate that employment in Malta continued to increase and the unemployment rate remained stable during the past five years. However, other statistics also indicate a steady increase in part-time employment and temporary employment, which may be symptomatic of precarious work. Still, both indicators are by far below the EU27 average.

According to the report, wages in Malta during the peak of the economic crisis, that is, between 2008 and 2009, declined by an average of one per cent per year but eventually did recover after 2010.

However, despite registering higher employment levels, the wholesale and retail, hotel and restaurant, and transport and storage sectors reported lower real wages in 2012 compared to 2011. Wages in these sectors fell by nearly 3%.

This fall in purchasing power affected nearly 30 per cent of those who are in employment and is attributed to more competition from abroad and a saturated market for wholesale and retail, higher utility costs, pressure to keep room rates stable for the tourism industry and the restructuring of the national airline, Air Malta.

As regards labour time, the labour force survey points out that the actual hours worked by employees and self-employed declined between 2007 and 2011. This decline can be attributed to an economy that is creating more part-time than full-time jobs. On the other hand, although the Maltese economy did not experience an increase in the unemployment rate similar to other countries; the economic slack was in part compensated for through reduced over-time.

A small decrease in sick days taken per employee is seen as a direct result of lower employment levels in the public sector. As a matter of fact, public sector employment went down by 1,450 jobs, from 42,461 employees in 2007 to 41,011 employees in 2011.

Labour force survey statistics indicate that during the 2007 to 2011 period, Malta registered the sixth highest increase in temporary employment as a percentage of total employment, from 5.1% up to 6.5%. But Malta remains well below the EU27 average of 14 %. Concurrently, part-time employment increased by 1.8 percentage points up to 12.4% in 2012. This is seen as an indication that Maltese entrepreneurs are resorting to more flexibility, even though self-employment as a percentage of the total remains stable. 

Employers did not shed jobs because it is virtually impossible to let workers go in Malta. Precarious work is on the rise for the same reason. No one wants to hire under regulated conditions, because you cannot replace employees. This country is in dire need of a labour market reform - combined, of course, with better support and training structures for the unemployed.