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Mark Mercieca
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Question 2: What global forces are affecting the Maltese economy,
and what are their main consequences on local work patterns and
employment trends? Discuss such issue by referring to relevant
literature and theoretical material.
Being a classical example of a small developing island state (SDIS), following the
independence from the British rule, Malta and its economy experienced several of the
economic vulnerabilities (Briguglio, 1995). In the decades following its independence,
Malta adapted to the dynamic global factors by implementing major structural changes
in its economy. This adaptive behaviour ensured that, against all odds, Malta’s
economic growth exceeded that of much richer states particularly during and after the
Eurozone crisis (Caruana Galizia, 2017).
The aim of this essay is to identify some of the major forces that have compelled the
Maltese Economy to evolve from a mostly agrarian economy (pre-colonial era) to a
more service based economy. The effects that these developments had and continue
to have on work patterns and employment trends will also be analysed with particular
reference to the employment of foreign workers in Malta.
In the past three decades, a lot has been said about globalisation and many scholars,
economists and sociologists have dwelled on its definition and effects on the world. In
his article ‘Defining Globalisation’, JR Scholte (Scholte, 2008) argues that this term
can be interpreted in several different ways and most relevant to this essay is
‘Liberalism’. According to Scholte, globalisation denotes a process, contemporarily
known as ‘Neoliberalism’ in which authorities seek to reduce government controls on
trade, capital markets and border trades. Scholte further argues that although many
scholars and sociologists have attributed neoliberalism to prosperity and democracy,
other critics contend that it produces social inequality, poverty and destroys cultures.
The European Union (EU) in its nature is a free market, which facilitates trade and
allows free movement of capital and persons between borders of member states.
These neoliberal policies have long been at the core of the Union and along the years
have influenced the Maltese politics and its economy, particularly following the
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country’s accession to the bloc. In fact, since 2004, Malta has seen its most significant
change in decades if not centuries, when it comes to society, politics and economic
structure (Tabone, 2014).
However, changes in the Maltese economy had started before joining the bloc, and
testimonial to the rapid shift in economic and political structure is the European
Commission’s report following Malta’s first submission for membership to the union in
1990. The report, dated 12 June 1993, observed that: “the Commission feels that it is
important to send to the authorities and people of Malta a positive signal to encourage
them to undertake vigorously the requisite reforms to transform Malta's economy into
an open and competitive one” (European Commission, 1993).
These observations by the Commission reflected an economy that for decades has
been tightly controlled by the local government, which sought to protect local
businesses from external competition. Driven by sheer will to joining the Union
however, Malta committed itself to overhaul its economic fundamentals. This process
saw the privatisation of several state-owned industries such as ‘Sea Malta’ and a move
from monopolistic markets to deregulated markets with increasing competition, such
as the telecommunication market. Reforms accelerated with the second accession
process that was initiated in 1998 and saw the removal of trade tariffs and the
privatisation of the dockyards (Tabone, 2014).
Another major restructure in the Maltese Economy has been the stark increase in
exported services, especially in recent years. It is important to point out that since the
British rule Malta has always had a significant service sector, which was a direct result
of a well-established naval base on the island. With the accession to the EU however,
the Maltese economy has increased its reliance on the service sector. Figure one
below suggests that the service industry was always more prominent when compared
to other sectors. Yet, between 2006 and 2014, the contribution of the services industry
to the gross value added increased further (at the expense of other sectors) (Grech,
2016).
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Figure 1 - Sectoral Shares(Grech, 2016)
The increased concentration towards services industry can also be attributed to
Malta’s accession to the EU and in fact, Dr Grech argues that it is a direct result of
liberalisation measures taken by the government coupled with the availability of higher
and more educated labour resources once the economy started opening up. He
continues to observe that in the first decade following entry into the EU, Malta has
experienced the highest increase in the contribution of the services sector to the Gross
Value Added amongst the member states.
Considering that such change in the economic fundamentals occurred in a relatively
short period of time, the local labour market did not have enough time to react to the
new demands. Adding to this challenge is the steady decline in local working age
population that Malta (similar to other EU countries) has had in the past two decades.
In another report issued by the Central Bank of Malta (Grech, 2015), Dr Grech points
out that by 2014, the Maltese working age population (excluding foreigner workers)
was to decrease by 1%. This however was not the case and an increase of 3% was
recorded (between 2004 and 2014), which increase can be directly attributed to the
influx of foreign workers particularly since the accession to the EU.
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Figure 2 - Working Age Population (Grech, 2015)
As the demand for labour rose, the local workforce share of foreign workers also
increased. However, in his report Dr Grech emphasises that the rise in this share,
unlike common belief, does not reflect foreigners taking up Maltese workers’ jobs. In
fact, the increase in foreign workforce share is occurring simultaneously with a
significant increase in Maltese workforce, which is expanding mainly due to an
increase in female participation (Jobsplus, 2019a). Despite this significant increase in
female workforce in the last 2 decades, the EU commission in its 2019 country report
point out that Malta’s gender employment gap, which stood at 24.1% in 2017, is the
highest in the EU (European Commission, 2019). The Maltese Government has
heeded to the Commission’s recommendations and embarked on several projects
aimed at reducing this gap by promoting better work-life balance. This is being done
by giving free access to childcare facilities and by promoting a ‘working from home’
mantra, amongst other efforts.
Having a strong presence of foreign workforce in the local labour market also
increases productivity. On this topic Rolfe mentions three main factors that contributed
to this increase (Rolfe et al., 2013). Firstly, (and most relevant to Malta) foreign workers
bring with them a set of knowledge and skills not present (or scarcely present) to the
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local work force. This is particularly relevant to Malta’s case due to the fact that most
foreign workers are being attracted to our country in order to fill posts in new emerging
sectors which the local workforce cannot fill. Secondly, Rolf argues that foreign
workers are likely to motivate the local work force in acquiring these new skills and
knowledge in order to compete with them. Thirdly, foreign workers are likely to
influence business operation in a local community in such a way that these will be
more inclined to invest in new production technologies. By referring to the statistical
information highlighted in Figure 3 below, one observes that most of the foreign
workers (mostly Third Country Nationals) fill low skilled (elementary) jobs (Jobsplus,
2019b) and therefore, in such case, Rolfe’s theory does not hold.
Figure 3 - Employed Foreign Nationals by Type of Employment (Jobsplus, 2019b)
According to Maria Bartolo Zahra in her article on the Times of Malta (Bartolo Zahra,
2018) the current dynamic demographic and economic environment, coupled with vast
technological advancements and emerging transnational companies in Malta, has
brought about a change in work patterns. These new patterns necessitate a deviation
from the traditional daytime working hours in order to accommodate for a better work5
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life balance. The latter balance is becoming more relevant in a society where women
are more active within the workforce and in an ageing population where a large
percentage of the local labourer needs to tend for elderly relatives. Ms Zahra’s views
are closely backed by the results of an in-depth survey carried out by Marika Fsadni
on how Work Life Balance (WLB) measures are being implemented in Malta (Fsadni,
2009). Amongst other results yielded by this study, it was identified that the most
common request pertaining to WLB that employers received from their respective
employees were related to work patterns and these are:
-
Switching from full-time to part-time;
-
Working on reduced hours;
-
Working with Flexi-time.
In the last few years, one may also add to this list the requests for teleworking. As
previously mentioned, with the emergence of new transnational sectors like online
gaming and financial services coupled with the availability of the necessary
technology, these measures are being implemented by most leading companies as
well as by the local government. Working patterns have recently been widely
influenced by the pandemic situation in 2020. Most employers have widely increased
personnel on shift basis and implemented teleworking or blended working
arrangements. Teleworking in fact is being regarded by many as beneficial both to the
employer and the employee with some considering it as a permanent solution. Whilst
the former can benefit from reduced operational costs and higher productivity, the
latter may achieve a better WLB and may also reduce his expenses significantly
(IURIS Malta, 2020)
In an ever changing demographic and economic environment, Malta has seen its
economy adjusting and restructuring to meet rising challenges. Whilst the country has
always been susceptible to global forces, since its independence from the British rule
and accession to the EU, Malta has seen its biggest economic restructure in the past
few decades. In this essay, the discussion was limited to what are being considered
as the major forces shaping the economy and employment trends, however it is
acknowledged that other forces such as technology and social change contributed to
further changes in the Maltese economy.
.
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References
Bartolo Zahra, M. (2018). Go for Workplace Flexibility. The Times of Malta.
https://timesofmalta.com/articles/view/go-for-workplace-flexibility.680702
Briguglio, L. (1995). Small Island Developing States and Their Economic
Vulnerabilities. In World Development (Vol. 23, Issue 9).
Caruana Galizia, P. (2017). The Economy of Modern Malta: From the Nineteenth to
the Twenty-First Century (K. Deng (ed.); 1st ed.). Palgrave Macmillan.
European Commission. (1993). Commission Opionion on Malta’s Application for
Membership. https://ec.europa.eu/commission/presscorner/detail/en/DOC_93_4
European Commission. (2019). Country Report Malta 2019.
Fsadni, M. (2009). Creating innovative working arrangements : through the support
of public employment services for a better work life reconciliation : a
transnational report. s. n.].
Grech, A. (2015). Understanding the Macroeconomic Impact of Migration in Malta.
Grech, A. (2016). Understanding the Maltese Economy. In Central Bank of Malta.
Gutenberg Press Ltd.
IURIS Malta. (2020). Covid-19 and Teleworking: a permanent solution?
http://iurismalta.com/covid-19-teleworking-permanent-solution/
Jobsplus. (2019a). Annual Report.
Jobsplus. (2019b). Foreign Nationals Employment Trends.
https://jobsplus.gov.mt/resources/publication-statistics-mt-mt-en-gb/labourmarket-information/foreigners-data#title3.4
Rolfe, H., Rienzo, C., Portes, J., & Mumtaz, L. (2013). Migration and productivity:
employers’ practices, public attitudes and statistical evidence (Issue November).
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Scholte, J. A. (2008). Defining globalisation. World Economy, 31(11), 1471–1502.
https://doi.org/10.1111/j.1467-9701.2007.01019.x
Tabone, P. (2014). Malta’s EU story. How ten years of EU membership have
changed the country.
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