Malta should embrace flexible retirement and part-time working for older employees, according to recommendations from two of the country’s main social partners.
Such measures could help address labour challenges caused by increasing economic old-age dependency and a growing population, the Malta Chamber and General Workers Union (GWU) said in a recent presentation to the Malta Council for Economic and Social Development (MCESD).
Economic old-age dependency refers to the number of unemployed people aged 65 or above compared to the total employed population between the ages of 20 and 64 – a number that, in Malta, is expected to more than double over the next five decades.
Drawing on findings from the European Commission’s 2024 Ageing Report published last month, the presentation showed how the numbers of inactive young people below the age of 20 and older people aged 65 and above are both set to increase considerably over the next 50 years, and at a rate outstripping the EU average.
And with the same report estimating Malta’s population will grow by 60% to around 800,000 by 2070, increasing old-age dependency and a shrinking workforce have analysts worried.
“We have not succeeded in optimising people over 65 to remain in the labour market. Malta lags badly in this regard when compared to Anglo-Saxon countries and other EU member states,” former chair of the Pensions Working Group, David Spiteri Gingell, told Times of Malta.
But as well as flexible working, financial incentives such as tax benefits for employers and attractive rates for those choosing to draw their pension later could also help retain workers above the age of 65, he said.
“The [part-time working] recommendation I put forward with the Chamber of Commerce and the GWU is one incentive among a package of such reforms. It should not be seen in isolation. And it definitely should not be introduced as a stand-alone measure.”
Stressing that many older people dropped out of the workforce early due to health issues or family commitments rather than by choice, Spiteri Gingell said flexible retirement could provide benefits in such scenarios.
“A flexible retirement pathway would allow such persons to continue, with the economy benefiting from their experience, knowledge and institutional memory, rather than lose them outrightly as is the case now,” he said.
What does Malta stand to gain?
Should Malta not adopt a different approach, the proportion of 65- to 74-year-olds in work is set to reduce from the 11.1% seen last year to 6.6% by 2030, according to figures presented to the MCESD.
However, should the country change tack and attract more older people into working longer, it could reap considerable financial benefits.
The Malta Chamber and GWU found that if Malta increases participation of 65 to 74-year-old workers by 40%, it would add €53 million to the economy by 2030 and €184 million by 2060.
And should the country increase the rate to match the EU average, the economic benefit would be worth over €470 million by 2070, or 1.2% of GDP, they said.
Population changes
Malta’s population is expected to grow at the highest rate in the EU over the next 50 years, the presentation showed.
And while the population across the bloc is expected to contract by 4% by 2070, in Malta, it is projected to grow by a staggering 54%, an increase largely driven by migration – the rate of which is expected to rise to the highest levels in the EU.
However, with the proportion of the population aged 65 or above expected to rise to one in three by 2070 – up from one in five seen last year – a greater financial burden is expected be placed on the country’s working population.
The good news for Malta is that its participation rate in employment and education among the working-age population is expected to remain strong throughout the following decades, maintaining above-average numbers when compared to the EU. By 2070, it is expected to stand at 87%.
Meanwhile, Malta’s labour force is expected to substantially increase, rising by 31% by 2070 when compared to the numbers seen last year. This is projected to deliver a potential growth rate to the economy of 0.5% – the joint-highest in the EU alongside Luxembourg.