During a business breakfast organised by The Malta Business Weekly, you mentioned that employees are changing jobs 9 or 10 times more frequently than in past generations. What effects is this having on the job market?

The main impact is that employers are finding it hard to invest in their employees, especially if they are newly employed. They believe that if they will invest a good deal of money, it is highly likely that those employees, if very good at their job, could be poached by other companies and so the return of the company’s investment would go to another employer. So employers are being careful when it comes to investing as they are experiencing a high turnover rate.

Last year was the first time that a relative majority in the labour market had been employed with their employer for less than a year. The rate of turnover is around 38% to 40%, meaning that around 40% of employees on average change their jobs each year. This rate was below 30% a couple of years ago and we have witnessed a steady increase over the past years.

With people changing jobs so rapidly, and the low unemployment rate, doesn’t this cause a skills shortage?

Of course. The main problem we have is a numerical one. The current economic situation is that the economy is creating around 13,000 net jobs a year, over and above what existed the previous year. The problem is that each year, the number of natives entering the labour market is not more than 3,000. Over the years we experienced a decrease in the number of births affecting the inflow into the labour market. We need to get the other 10,000 from somewhere and that is where foreign workers come in.

So the main issue is numerical, but there is also an issue of skills. The type of skills required are various, both high-end and low-end. It is not an issue that locals do not want to do certain jobs, although it is true that right now in this economic environment one tends to be more choosey but the main issue is that you cannot square a circle. If there are only 3,000 locals entering the job market each year and the economy requires 10,000 more, you need to get them from somewhere.

You mentioned a shortfall of 10,000 workers each year. Realistically, how sustainable is it for Malta to bring in those 10,000 on a yearly basis?

I’ve always been on record saying that if we want to sustain our economic growth rate we need to bring in these foreign workers otherwise the economy will come to a stand-still. At the same time i have always said that this will bring about a significant number of challenges. We are seeing this in education, through an increased demand for schooling; we are seeing this in the healthcare sector due to increased treatment demand; We are also seeing this in terms of traffic though the challenge here is more pronounced in the public transport sector as statistics show a third of foreigners use this service, while another third walk to work and the rest use private transport.

Perhaps the biggest challenge is housing. It takes around two years from when a planning application is accepted until a housing unit reaches the market. Nevertheless we need to get this economic growth as the benefits need to be reinvested in the economy to enlarge it and make it sustainable for an older population tomorrow.

Malta has among the lowest fertility rates in Europe and this will come with its price-tag. Our pension model is that today’s workers pay for today’s pensioners, and we have no such thing as saving for tomorrow’s pensioners. In order to make keep this model as sustainable as possible we must ensure that the number of people in employment continues to increase, otherwise someone needs to foot the bill for pensions. If not, Either tomorrow’s pensioners will need to accept a less generous pensions or tomorrow’s workforce would need to pay more in taxes to sustain those pensions, or the country would need to shoulder more debts.

But again, this will be a continuous thing and we will always need more workers for the ageing population in the long-run. Is that really sustainable?

We have to make it. Otherwise we need to make a series of other choices which are not that easy to digest. What we have right now, in terms of challenges, we are quite aware of. But the challenges that would come in the absence of this could be far more painful than what we are experiencing right now.

Some argue that wages aren’t rising adequately along with housing prices etc. Do you also see this?

This boils down to economic theory. The more supply there is the less the pressure on wage increases. So the more people we get in, the less pressure there is on wage growth. Having said that we need to be careful as we are competing in an environment where other EU member states are still facing certain difficulties, and so if we had to increase wages at a very fast pace such that they would end competitiveness, then it is highly likely that we would put certain jobs at risk.

Most of the time, if wages increase at a very fast pace, the first to pay the price will be the unskilled workers. There are certain big companies in Malta that, 10-15 years ago used to employ hundreds of workers, more than a thousand at times. If you had to look at their workforce today, it is half the amount it was 15-years ago as wages increased, and if they find out that it is expensive to employ labour they will resort to automation.

This is likely to happen across the board. The moment employers realise that wages are becoming too expensive, they will try to substitute labour with capital as much as possible. I am not saying this to excuse employers from not giving wage increases, but wages have to be compensated with higher productivity. If that fails, employers will simply conduct a substitution.

What about the arguments that wages aren’t competitive, in the sense that people are finding it hard to rent or purchase housing, and some complain about other prices. There are arguments that you can’t get anywhere with a wage of €20,000 to €24,000.. 

No, if you are a single person definitely not. I am not going to try and beat around the bush.

That’s way above the minimum income, its middle-class income...

Yes. So if your stream of revenue is just that, the amount you mentioned, and there is no other income coming in, and if you need to rent, then it is highly likely that this individual will have problems if he or she is trying to purchase a new home. So therefore sure, there will be certain issues.

Lets untangle two issues. If it is property, and I know it will sound controversial, the solution to the problem is simple but challenging. Given that we are experiencing all this demand, we can only solve the issue by increasing supply. There are no two-means about it. If we want to stabilise the price of rent, and it is already stabilising – I’m not saying it’s cheap far from it, and it is what it is – we have to increase supply. That is the only thing as of course the market will ultimately regulate itself.

Now with respect to the cost of living and making ends meet at the end of the month, for certain people with low income, especially if they have to pay rent and only have one stream of income, definitely have an issue. I cannot envisage a family not having problems if they just rely on a low-income and have to rent. One cannot try to say otherwise. Yes certain families are facing certain difficulties.

Yes government has to continue incentivising work, and we have to ensure that there is the highest work intensity possible in families. Now if they cannot make ends meet, and everyone is putting their fair share into the labour market, then I see no problem with government helping those families.

But Malta’s economy is doing well. Many are above the minimum wage, but now we have a situation where the average wage might not be able to keep up. If the economy is doing well and the Maltese aren’t feeling it then what is the point, wouldn’t slowing down the economic growth help?

I wouldn’t say that Maltese aren’t feeling it. The last Eurobarometer survey showed that the Maltese were the most optimistic among the EU states when it comes to the economy and how they are feeling.

A good 80% or more said that they feel quite satisfied with their economic situation. So I wouldn’t say the Maltese aren’t feeling it. We must also keep in mind that the standard of living is not only measured by wage increases, and one must also look at measures of benefit to people. For example, parents are likely to benefit from free childcare and free school transport. These measures are saving families thousands of Euros a year, so they can allocate  this disposable income on other things. Having said that it does not excuse the fact that there are certain pockets in society, like pensioners, who need more help from government.

With regards to the skills situation, there have been concerns that the education system is not providing the necessary training for people to get the skills for the job market. What is your opinion?

Yes, and this is a challenge in itself. In the current labour market one would expect most high skilled jobs to be taken up by natives but that is not the case. Unfortunately we have almost 45% of those who are 16-years-old not getting enough o-levels to pursue further education at Junior College. Perhaps there are some who do resits,

The issue is that we are in 2019 and the skills-set required by tomorrow’s employees is very different from what was required 20 years ago. Tomorrow’s employees will require a skill set that has to be as dynamic as possible.

Some question whether university is preparing students for a particular job... students will change quite a number of jobs throughout their lifetime. So one needs a set of skills that is as dynamic as possible so that the individual can adapt throughout his lifetime. The issue is that if our youths are not furthering their education either at university or at MCAST they will have a really big issue in adapting to tomorrows labour market.

How do you solve this issue, and secondly, you’re mentioning the number of jobs people will change in their lifetime, this could also affect their mental health...

But that is where the economy is heading. The problem with labour turnover is not that employees are being forced to change jobs all the time, and it is coming out of choice. If we had to look at the number of redundancies taking place now, we don’t have more than 25-30 a week which is a historical low, so people are changing out of their free-will.

So why is this a problem you might ask? The type of skills required by the labour market are changing rapidly. If the young generation do not have the adequate literacy and numerical skills they will find difficulty adapting to tomorrow’s labour market. It is very worrying as it will create a divide between those who have skills and will be productive and have higher wages, and the one’s who don’t who will be stuck in a situation with limited job opportunities. By limited I mean even in terms of quality so even if they find a large number of jobs they would continue finding the same type of job that pays the same amount. So even if there is a choice it wouldn’t really be a choice.

What can we do about those who are still failing to get enough o-levels to further their education?

One thing we have not yet succeeded in doing is persuading families as to how important education is for their children. I still meet a number of people who, when asked why they are choosing to stop reading for something, say it is better for them to earn money right now.

The issue is that eventually they will have enough of work. So the amount they invest in education will pay a big deal later on in life but unfortunately there are still certain families who do not appreciate this fact. I believe we need to advertise this more than we do now and families need to realise that education is key to the success of their children. This has to start from the young ages and I don’t think we are doing enough in this area.