How Malta’s hidden public sector is hollowing out private enterprise

Many businesses keep asking: Where have the Maltese workers gone? Despite policymakers repeatedly arguing that Malta’s tight labour market is driven by rapid economic growth, the answer goes beyond the rate of our GDP.

It is also in the structure of employment itself, and in how we define ‘public sector’.According to National Statistics Office December 2025 data, there are 304,226 full-time jobs in Malta.

Of these, 82% are classified as private sector and 18% as public sector. At 18%, Malta sits slightly above the EU average of 16% for public sector employment.

But you need to look beneath the headline numbers to get the full story. Based on June 2025 figures tabled in parliament, Malta has a presence of 128,774 foreign workers of which 98% are employed with the private sector.

Comparing this figure to the latest NSO data equates to over 40% of the total full-time jobs, leaving you with a Maltese workforce of 178,028. When also factoring 55,536 in the core public sector, as just confirmed by NSO, that results in circa 31% of Maltese workers employed directly by government.

The true number of Maltese working with the State or sustained by it must be significantly higher than 31%

Does this reflect the real share of public-dependent employment? The indicators say no because there is a shadow public sector that official data does not count. Jobsplus and NSO define the public sector narrowly: ministries, government departments, and local councils.

They exclude many that can be classified under three categories which are publicly funded, publicly controlled, or wholly dependent on government outsourcing. These jobs appear in the Public Accounts reports, yet they are statistically invisible in the public sector count and classified by Jobsplus under ‘private’.

While both entities appear to be applying Eurostat accounting rules, the problem is that the methodology masks the true economic reality. There is a quasi-public workforce sitting inside the broader public sector.

Given the absence of officially published consolidated data, the size of the shadow public sector remains unclear.

However, by reverse-engineering and untangling data from National Audit Office reports, financial statements of state-owned enterprises, and public procurement registries, it is evident that the presence of a shadow public sector is materially widespread.

After deducting foreign workers and combining the core public sector with those in positions that depend on public funding to exist, the true number of Maltese working with the State or sustained by it must be significantly higher than 31%.

The actual figure will be debated, given data and timing gaps and the assumptions required. Nonetheless, the scale of Maltese working directly or indirectly with the State is highly relevant to understanding our labour market.

It deserves greater transparency and demands a formal policy response from the relevant authorities. Beyond the public sector, recruitment into the shadow public sector is quietly hollowing out Malta’s real private sector.

It is also fuelling a culture of entitlement with low performance accountability given the political backing, while starving private firms of much-needed workers.

These jobs are not subject to the same market constraints as the private sector.

Wages, hiring, and job security are set by government policy, not by productivity or competition. So, what needs to change? First, perspective.

Any debate on labour shortages and productivity must start from the real share of public-dependent employment.

Neither the 18% core public sector compared to total full-times jobs, nor the 31% of Maltese workers within the public sector, net of foreign workers, will lead to the right diagnosis and prescription.

Second, transparency. The government should stop hiding the numbers classified as ‘private’ and start counting the public sector based on the workforce it funds, not just how it classifies it statistically.

We need a consolidated breakdown that shows employment in government-owned companies, agencies, and outsourced contractors separately from genuine private enterprise. The data exists in the Public Accounts; it just is not consolidated.Third, balance.

The government has a legitimate role in providing essential services. The problem arises when public-dependent employment becomes an overly dominant force in the labour market, crowding out local workers away from private enterprise.

This ultimately also risks crowding out private investment and make the economy dependent on government spending rather than productive growth.

Bottom line: the issue is not whether government has a role, it most certainly does, but whether its reach, direct and indirect, has grown to a point where it distorts the labour market, drains local talent, and makes foreign workers a structural necessity rather than a choice. If we want sustainable growth, we need a labour market that rewards productivity, and a public sector that serves without crowding out the private economy. 

Norman Aquilina

Norman Aquilina, Group Chief Executive of Simonds Farsons Cisk plc