Businesses are increasingly reporting labour shortage as a key factor limiting their overall performance, more so as they seek to regain momentum as the impact of the pandemic continues to gradually ease off.

Even if the pandemic accentuated and underscored our labour shortage, it must be stated from the outset that the root to the problem is pre-pandemic. This situation calls for a closer look at the circumstances and drivers of this shortage. Yes, job mobility, as opposed to job stability, is steadily becoming more prevalent, especially among the younger generation. Yes, some job seekers are being more selective, not only on the type of employment but also with their expectations of flexible working arrangements.

Is this the result of work / life balance considerations, changing work ethics or other shifts in society? Where have all the Maltese workers gone? Why this growing reliance on more foreign workers? Is it simply the result of our economic growth or something more deep-rooted?

These are some of the questions that many employers repeatedly ask as they struggle in their efforts to recruit or fill any vacancies.

Of relevance here is the mushrooming of recruitment agencies. Such agencies are widely recognised by employers as part of the solution in seeking to fill in a growing number of vacancies. However, it must also be acknowledged that such agencies are also contributing towards the escalation of this challenging situation, notably through headhunting and facilitating, if not promoting, job mobility.

These contrasting factors understandably stand at the basis of the business model of such agencies as they entice and reach out to potential candidates along with interested job seekers and changers.

Furthermore, this situation has given rise to more direct employee poaching while employers seek creative ways how to facilitate and expedite onboarding of new recruits through practices which until recently were non-existent or less prevalent.

The labour shortages are understandably also contributing to higher salary expectations. This, at face value, will most understandably be regarded positively by benefitting employees.

However, let us not automatically assume that widespread cross-sector wage growth is beneficial without also ensuring its sustainability. Indeed, we need to ascertain that any resultant wage growth is equally complemented by improved levels of productivity, thereby safeguarding the employment and, ultimately, the competitiveness of many businesses.

Going forward, how can one best address this situation?

We first need to extend the labour market by introducing measures encouraging more people to enter and stay in employment, even beyond retirement age. We also need to address the unjustifiably oversized (under)employment levels within parts of our public sector. A sector whose real statistical count, one must underline, is sometimes being partly camouflaged by the secondment / contracting of workers via private recruiting agencies. Furthermore, we need to better manage the engagement of foreign workers.  

Where have all the Maltese workers gone? Why this growing reliance on more foreign workers?- Norman Aquilina

Beyond this, we also need to prioritise reskilling and work towards ensuring people have the education, training and skills to meet the arising job demands. This is essential given our labour market is intrinsically linked to our country’s competitiveness, which is dependent on our productive skills and capabilities.

Here, it is highly relevant to cite the way the situation is being handled in Denmark, which, like Malta, is currently experiencing the challenges of a tight labour market. The Danes clearly recognised that this was more of a strategic problem than an economic achievement which needed immediate attention.

Indeed, an increasing number of Danish businesses had been reporting that labour shortages were limiting production, citing risk that wage growth could exceed the country’s forecast of three per cent this year, thus eroding their competitiveness.

As a result, the Danish government responded, securing the political backing for measures to boost economic growth by tackling the labour shortages that were broadly recognised as threatening to derail their economic rebound.

As Denmark’s gross unemployment rate fell to a 13-year low of 2.3 per cent in November and new vacancies are at record high levels, the recently clinched deal is set to cut jobless benefits for fresh graduates and boost incentives for seniors to remain in the workforce. The deal will also temporarily alleviate conditions for foreign workers to help address labour scarcity in the next two years.

The Danish approach is certainly an eye-opener which deserves consideration from a local perspective. After all, improving our overall productivity, hence competitiveness, is key and making best use of our limited human resources always remains of fundamental importance in achieving a sustainably strong and vibrant economy.

Let us not oversimplify or, worse, misinterpret this situation by just positively harping on our record low unemployment levels and growing labour demand. What we need is more meaningful focus and action on the real, rational and relevant economic and social considerations to ease an otherwise structurally tight market if left unchecked.

Quoting a note of caution as rightly flagged by the Malta Chamber in its recently published ‘National Workforce Strategy’ document: “Malta is required to address serious workforce limitations. If such limitations are not timely and properly dealt with, the country’s future wealth and prosperity will be compromised.”

This calls into cause all social partners, the government, employer representative organisations and unions. Collectively, we must ensure the capacity, ability and agility to effectively respond to the pressing labour market requirements of today and tomorrow.

Norman Aquilina, Group CEO, Farsons