The term cheap labour has been used many a time, especially in the context of an ever-growing economy.  This constitutes a situation where members of the workforce are engaged in labour that pays pittance, thus creating a mismatch between production and employee compensation.

With the lifting of COVID-19 restrictions, the Maltese economy is set to reopen with the aim of taste the economic success of the very recent past. This time, however, workers who contributed to Malta’s past economic success may be unavailable. An operator within the Catering Industry, when interviewed by the Times of Malta, explained how many foreigners left the island, while skilled native workers who lost their jobs during the pandemic and could not survive on the wage supplement left the industry. These workers have found an alternative job and are now reluctant to return.  The Times of Malta also reports the Malta Employers Association as saying that the private sector is finding it grueling to recruit workers due to what Mr. Joe Farrugia called “the exodus of foreign workers driven by the pandemic”. Mr. Farrugia also explained how this recruitment catastrophe goes beyond the catering industry, as it is widespread across all industries.

The writing has been on the wall for quite a while. Is it so hard to digest? It is evident and abundantly clear that Malta, just like other developed countries, is susceptible to cheap labour with unfavourable conditions and its consequences. This is complemented with a dose of trickle-down economics.  

Industries which are known for thriving on cheap labour, such as Hospitality, Catering and Construction, have been evidently sustained with an influx of third-country nationals (TCNs), who left their countries with the premise of a better life. These TCNs, which come from a wide spectrum of cultures, were forced to leave their homes because their respective countries are unable to grow their economies to sustain their people. Together with native labour supply, hardworking Africans, Eastern Europeans and Asians contributed to this wealth, receiving peanuts in return. 

The situation is even more problematic than we might imagine. Certain employers within Malta’s private sector have thrived over the exploitation of vulnerable TCNs, whose financial expectations are so low that they accept almost anything that they are offered. The excuse of paying the minimum wage as required by law is not good enough. The current legal minimum wage is the equivalent of a starvation wage, plain and simple. Cheap labour does not pay in the long run as it is unsustainable for a multitude of reasons. Cheap labour is a deterrence, as in the long term it would leave employees relatively worse-off, rendering them poor and seeking opportunities elsewhere. Employers do not benefit from high rates of employee turnover, as this would disrupt their productive capacity, incurring them higher training and hiring costs. Employers in Malta have long lamented about the fact that they cannot recruit enough skilled workers.

How can one expect skilled workers to work under conditions which are inferior when compared to those of other countries? The medicine and nursing professions are a prime example. Most of all, cheap labour hinders the sustainability of the state’s coffers. Cheap labour entraps its victims into poverty, taking away their financial independence often at the cost of making substantial sacrifices, thus creating the working poor. This puts the Government in a position where more handouts must be forked out, to give the recipients a chance to keep up with an already high cost of living. We are already experiencing this with first-time property buyers. In 2019, 82,758 persons, equivalent to 17.1% of the population were estimated to be at the risk of poverty. In a day and age where employment is at a record high, this is simply unacceptable!  It is unacceptable that a handful of individuals make handsome profits, whilst paying a pittance in return to those who enhance their wealth.

The COVID-19 recovery plan should make sustainable economic growth its priority, such that our economy works for the many and not the few. Sustainable economic growth necessitates a situation where those who engage in productivity are being compensated fairly, without being left worse-off. This complements green economic growth: Economic growth that respects not only the environment, but also the dignity of human beings.  

Dario Cacopardo is a trained economist, having read for a Bachelor of Commerce with Honours in Economics as awarded by the University of Malta. Currently, he is reading for a Master of Science in Applied Economics at the University of Bath.