Sociologists remind us of the Malthusian theory based on his observation of conditions in England in the early 1800s; Malthus argued that the available farmland was insufficient to feed the increasing population.
More specifically, he stated that the human population increases geometrically, while food production increases arithmetically. However, he thought that families during a good harvest would then abuse their newfound abundance, particularly by producing larger families.
At some point, their numbers would exceed their ability to provide the necessities of life. Malthus derived this conclusion from the Law of Diminishing Returns. Modern theory disagrees, saying his theories, which were based on 19th century Britain, do not prevail now; that the world has developed new streams of production and efforts are made to reduce poverty.
This may be true, however, there are many economic and cultural problems in different parts of the globe where people are seeking mobility to either escape poverty or for better jobs. In particular, there are millions of third country nationals who wish to migrate to Europe and the USA to seek a decent living future. They escape persecution, drought, terrorism, military dictatorships and poor living conditions. Examples include the millions of boat people who risk their lives sailing on dinghy crafts sometimes departing from Libya to cross the Mediterranean in search of a new future.
Not surprising, there are a number of local temping agencies, which against payment relocate TCNs from India, Pakistan, Bangladesh and Nepal, among others. Statistics show how the recent exponential growth of such human resources can be justified as no locals want to be seen doing menial jobs such as cleaning, dish-washing, driving cabs, delivering fast food on scooters and tough jobs on building sites. How does such manpower effect our productivity and cost of operations?
Given almost full employment, one wonders what are the prognosis of us achieving enhanced productivity. Back to the Malthusian theory, this may not exactly fit when assessing demographic problems faced by Malta yet we cannot ignore signs that a population explosion is on the horizon. Regulations have recently been drafted in Parliament to regulate temping agencies and tighten on abuses.
Ideally, we weed out rogue agencies abusing by recruiting TCNs charging €12 per hour for their service but in reality, only paying them €5.60 (sometimes, without standard conditions such as annual bonuses, health insurance and public holidays). There is a pressing need to look into our demographics starting first by determining the country's ideal carrying capacity. For example, in 2007, Guernsey moved to introduce a population cap and amid considerable controversy, the island's Parliament voted to keep the population at its current level of around 60,000. Critics note a bumper tourist year, but lament that the per capita yield has weakened partly due to cheap travel packages by low-cost airlines and rates by Airbnb.
Quoting IMF recent assessment, it hails Malta's impressive recovery from the pandemic but 2023 has also brought about greater pressures on the country's fiscal balances and a rise in income inequality. The government's remedy was to spend over €320m on energy subsidies last year. These subsidies, the IMF argued, disincentivise energy savings and green investments and contribute towards 40% of the deficit. IMF also observed that the poverty risk appears to be on the rise, with the elderly population showing signs of being increasingly at risk since the pandemic. Simply put, the gap between high and low earners, has risen above the EU average since the pandemic. More grey clouds follow.
A new ETS tax on transshipment ships that visit our harbours starts this year. As can be expected, importers and exporters have been voicing their concerns about how this new directive, which they feel unjustly penalises Malta as an island and how this is set to force a hike in prices and fuel domestic inflation. Yet on a positive note, one appreciates that based on a population of circa 540,000, the number of unemployed persons is a mere 7,610, coupled with the effect of saturation of jobs in the public sector (the lure of working half days in summer and other perks, cannot be matched by the private sector).
Add to this a number of intensive schemes for mass employment of unskilled helpers via local councils and the GWU jobs regeneration scheme. Is this anathema to the panegyrics of Malthus and his theory of over population and few jobs? Malthus' theory may be discarded as not applicable in the 21st century.
This is not happening due to natural growth saddled with a low fertility rate of 1.08. Studies point that a healthy replacement rate is a minimum of 2.1. A future dilemma takes a different twist, when the finance minister announced that at the current rate of GDP increase, the population will explode to 800,000 by 2040. It is here that Malthus' theory starts to make sense. Will there be enough workers placing their shoulder to the wheel to generate a higher GDP to sustain and house such a population explosion? Are we competitive enough and does our education facilities train enough qualified workers to meet present challenges of AI and digital literacy? Mismatch of skills is creating shortages of skilled labour such as technicians because the dirigisme system is not generating enough candidates qualified in Stem subjects.
This year, one hopes that fresh initiatives are taken by FinanceMalta, MFSAC and Malta Enterprise to rekindle a generative ecosystem to match challenges that new technologies have featured on the horizon. In such a spirit of rejuvenation, Castille had appointed a hand-picked team of experts in a think-tank. This is expected to be working with the ministries, regulators, enforcement agencies, NGOs and the private sector to reach equilibrium in the management of change in both human and productive resources. Recently it came up with 175 action points, which are being carefully mapped for cross-cutting impact and for their pragmatic implementation, from quick-wins to more complex ones, which require investment, resources and time. Pray that the dire prognosis of the 19th century Malthusian mercantilist writer will fly past our shores.
gmm@pkfmalta.com
George M. Mangion is a senior partner at PKF Malta