The need to steer the economy from dependence on low-skilled labour to a high-skill model that generates better productivity and value-added is gaining more supporters. Still, policymakers and business leaders often understate the hard work needed to navigate this transition successfully.

A Eurobarometer study has found that the skills gap in the Maltese workforce is holding back two-thirds of local companies from operating efficiently.

This study also reveals that although this skills gap has been getting wider for decades, policymakers and business leaders prefer to adopt short-term human resources tactics to bridge the skills gap.

Short-term solutions include importing highly skilled foreign labour, including many from third countries.

While a small island economy must never restrict workers’ mobility, depending on imported labour in the long term has negative economic and social consequences.

The incentive of young, highly skilled workers to pursue a career in Malta is dented when their qualifications and experience are not adequately compensated by businesses that prefer to recruit lower-paid skilled workers from third countries.

This phenomenon is already leading to a silent brain drain that is so wasteful.

The prime minister said that the stipend system will be reformed in the next budget to encourage more young people to opt for the more challenging courses that lead to qualifications sought by the new economy. This welcome development will hopefully encourage more young people to opt for the more challenging courses in tertiary education.

Still, much more needs to be done to bridge the skills gap. The government will do well to heed the advice of the Malta Employers’ Association to define the necessary reforms in the labour market. The dependence on imported labour has become so pervasive that reversing a small part of current labour market practices will be painful. Still, it must be done with more political determination.

The minister of finance argues that the private sector needs to develop ideas on how to update the economic model. Conversely, business leaders expect the government to define necessary changes rather than passively reinforcing the status quo.

So far, the government has not devised any action plan to upgrade the education system, reform the labour market strategies, and create incentives to promote high-added-value economic activities. No one wants to bell the cat and devise an action plan that defines what must be done to update the economic model.

The government must show leadership and take the public in its confidence. It must define an action plan to encourage businesses to invest in human capital rather than treat workers as a commodity that can be hired and fired quickly.

Ultimately, the search for excellence in the quality of our workforce will only succeed if education and economics policymakers and business leaders reward competence and skills appropriately.

No magic thinking can avoid the pain inflicted on those affected by the necessary changes. Societal leaders must be honest with the people on how the changes will be managed and how those most affected by reforms will be assisted to cope with the transition period.

The longer it takes to address the skills shortage with a long-term strategy, the more painful it will be to achieve this aim sustainably. Hopefully, the next budget will offer viable solutions to the widening skills gap with clearly identified milestones.