The Malta Independent 22 July 2024, Monday
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Are Malthusian theories coming to haunt us?

George M Mangion Monday, 11 September 2023, 15:33 Last update: about 11 months ago

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 18th 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 parts of the globe were people are seeking mobility to escape poverty and 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 dinghies, sometimes departing from Libya to cross the Mediterranean in search of a new future.

Over the years, Malta has also accommodated these migrants and lately there are several local 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 unskilled work on building sites.

How does such manpower effect our productivity? Given almost full employment, one wonders what are the prognosis of achieving enhanced productivity. Over the past decade Malta has increasingly moved away from industry towards the services sector, where, with some notable exceptions such as financial services and iGaming, the average value added per worker is relatively lower. Malta's economy is struggling, suffering from a deepening downturn in manufacturing output, a large deficit with no visible direction from Castille to tap new markets.

Of a population of circa 540,000, in July, the number of unemployed persons was a mere 7,610. Going into details, one notes how the unemployment rate for persons aged 15 to 24 years (youth unemployment rate) decreased to 8.1%, while the rate for those aged between 25 and 74 years stood at 2%, increasing by 0.1 percentage points from June.

With a saturation of jobs in the public sector, the lure of working half days in summer which cannot be matched by the private sector, add to this several schemes for mass employment of helpers via local councils and the GWU scheme, one is finding it difficult to fill new job vacancies unless taking recourse to migration agencies recruiting TCNs.

Is there a solution in sight? Malthus theory may be discarded as not applicable in the 21st century yet we are witnessing an explosive population growth in Malta. This is not due to natural growth, since with a fertility rate of 1.1, it is the lowest in Europe. A healthy replacement rate is a minimum of 2.1, but conditions discourage the young to delay marriage until they save for a deposit on a house.

The 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. Another worrying statistic is a projection by MHRA, that to fill existing and future licensed hotel bed stock, this inventory will demand up to 4.7 million tourists to satisfy an 80% occupancy level. Both statistics are hitting us in the face with a dilemma that the island will not produce enough to sustain such growth.

It is here that Malthus theory starts to make sense. Will there be enough natives producing wealth to sustain such population explosion? Are we competitive enough and does our education ministry supply enough qualified workers to meet the challenges of AI and digital literacy?

Mismatch of skills is creating shortages of skilled labourers such as technicians, because the bloated system is not generating enough people qualified in Stem subjects. The expected surge in wage increases, which mirror underlying inflation, results in increases which make us uncompetitive. Wage increases in Malta are not being reflected in an increase in production as shown in a recent survey commissioned by the Malta Employers' Association.

The extrapolated population explosion to 800,000 carries with it grave responsibility for Castille to plan productivity enhancements and seek new niches, where we can compete and export our talents.

How is this happening? Apart from holding in-style conferences, which churn the waters, particularly led by foreign speakers who rightly so warn us of the mismatch of population growth and reduced productivity. Castille appointed a select number of experts in a think-tank styled MFSAC. This is expected to be working with the ministries, regulators, enforcement agencies 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.

In summary, while the Malthusian theory may not exactly mirror demographic problems faced by Malta yet we cannot ignore signs that a population explosion is on the horizon. Can we start trimming the number of tourists hoarding our beaches? Can we tighten immigration laws, in particular weed out rogue agencies abusing by recruiting TCNs charging €12 per hour but in reality, only paying them €5.6 per hour without perks such as accommodation, health insurance, and holidays.

There is a pressing need to look into population management by determining the country's carrying capacity. For example, in 2007, Guernsey moved to introduce a population cap and amid considerable controversy, the island's parliament had voted to keep the population at its current level of around 60,000. Can we do the same before Malthusian warnings start biting?

 

gmm@pkfmalta.com

George M. Mangion is senior partner at PKF Malta

 

 

 


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