We often hear about Malta’s low unemployment and high economic growth rates. Yet, it seems many have started to realise that labour shortages pose a threat to this illusion of prosperity.

Employers, workers and labour-market policymakers all seem to have diverse proposals on how to deal with the current labour shortage that has hit most businesses, particularly hospitality, retail and care.

Policymakers in both government and business must acknowledge that the present shortage of workers is not a phenomenon created solely by the pandemic. It is equally important to distinguish between short-term tactics to mitigate the problem and long-term strategies to fix the structural flaws in the labour market.

Malta’s labour market, like that of some Western economies, is job-rich but, at the same time, many of its workers are wage-poor and insecure. This reality preceded COVID and will not be reversed by cherry-picking features from other systems that are perceived to have resolved this dilemma.

German employers’ commitment to training, US liberal hire-and-fire policies and Japanese emphasis on intelligent management systems can wrongly be labelled as the silver bullet that will fix the country’s labour market challenges.

Employers are clamouring for the dismantling of restrictions that prevent more foreign workers, mainly from low-cost non-EU countries, from joining the local workforce. Put simply, this mindset looks at labour as a commodity that can be acquired and disposed of as and when required.

An economy built on a constant flow of low-paid imported labour is structurally weak. As the pandemic has shown, plastering over the labour market cracks is at best a short-term solution. It is no substitute for a thorough rethinking of the sustainability of the current labour market policies.

The Malta Employers Association has made proposals to ease the immediate labour shortage pressure that some of its members are facing. They make two very valid recommendations.

The first is to encourage those who qualify for a pension but have not yet reached retirement age to remain actively employed while still earning half of their state pension entitlement.

A more forward-looking and valid recommendation is for further transformation in the country’s education system “to render it more flexible and dynamic towards reacting more nimbly to today’s and future demands of the economy”.

It would be naïve to argue that structural weaknesses in the labour market can be fixed by plugging in features that seem to offer an instant solution.

Increasing the minimum wage, especially for gig workers, is only a partial solution. Such a measure will not solve the problems of volatile hours, patchy training or enforcement of workers’ rights. Some countries like Australia and New Zealand are addressing labour market weaknesses with more determination. The strategies they use could inspire some best-practice models for other countries.

One solution could be the setting up a working group that includes employers and unions to establish proposals for sectoral deals spanning pay, training and employment practices focusing on low-paying industries.

Some employers may argue that this is a ‘back to the 1970s’ strategy and a dangerous one. But today’s labour market and the underlying power relations are different to what they were decades ago.

Both the government’s policymakers and industry leaders need to be flexible in their approach and aim to improve the working lives of thousands of workers to create a more stable labour market.

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