In recent years, the government has promoted fast economic growth by focusing on physical capital – building new roads, selling citizenship for cash and attracting industries like e-gaming and financial services through favourable tax policies.
In this context, human resources bottlenecks were inevitable. They often had to be resolved by treating labour as a commodity that could be imported according to the economy’s needs.
So it was refreshing last week to hear the Minister of Finance, Clyde Caruana declaring that this under-investment in people is no longer the way forward to make our economic blueprint sustainable in the longer term. Investment in physical capital can give quick economic results. But the benefits of sound investment in human capital are much slower and harder to measure.
Caruana launched a consultation on a new employment policy for Malta, looking to a post-COVID world while addressing the consequences of the country’s rapid economic expansion. In doing so, the finance minister identified several challenges that the labour policy of the last few years has created for Maltese society and the economy.
Underemployment, where workers are overqualified for the jobs they end up doing, is an often overlooked problem caused by various factors, including an education system often not fit for purpose.
Salary stagnation is another challenge, especially for the lower-skilled workers who have little or no bargaining power when seeking a job that can support their families. Third-country nationals have created downward pressures on the wages and salaries of local workers in many sectors.
The illusion of wealth that has been created by the government in the last few years is slowly being shattered. The finance minister has acknowledged that the introduction of a living wage is not feasible in the foreseeable future as “businesses are hanging by a thread”.
The World Bank rightly argues that “governments have a critical role to play in transforming human capital, because poverty, inequality and other disadvantages hinder many families from investing in their children’s health and education”.
Scientific and technological advances are transforming lives. The better prepared educationally will see their employment and wealth prospects improve substantially. Those who have been short-changed by our educational system will be the losers.
The government needs to upgrade its investment in human capital by ensuring our educational system improves the employability of many more of our young people. It also needs to ensure that those already in employment continue to be trained so their skills do not become obsolete with the fast developments in technology.
Today, a good part of our workforce is unprepared for the future that is fast unfolding. Importing labour as and when required is not the solution.
For instance, the recent exodus of foreign healthcare workers as a result of other countries offering better working conditions shows how important it is to make careers in healthcare more attractive to our young people.
Adopting the business model of countries like Dubai and other rich Middle East countries is not appropriate for Malta. Even economically successful countries like Singapore are trying to reduce their critical dependence on imported labour.
Human capital is increasingly going to be the most important long-term investment any country can make for its people.
Our prosperity and quality of life will depend on the quality of the jobs that the economy creates.
The government urgently needs to promote more and better investment in people to make up for the last few years of lost opportunities to promote social equity.