Tackling structural unemployment

One of the main challenges of managing the economy is that of minimising unemployment. In its recent economic history, unemployment in Malta has generally been of a structural nature, meaning that it has not resulted from an overall reduction in economic activity, as frequently occurs during recession periods, but rather results from the fact that some sectors of the economy are expanding as others contract.

A current buzzword in business is restructuring. It is to be expected that the process of restructuring frequently results in job opportunities and labour shortages in some sectors with an oversupply of labour in other areas.

One of the main functions of the Employment and Training Corporation is to reduce the frictional aspect of unemployment by segmenting the unemployed on the basis of various criteria. One of these is age.

The training and employment exposure scheme (TEES) is a recent initiative taken by the ETC, in collaboration with the Malta Employers' Association, that attempts to find employment for those who are over 40 and are registering for work.

This segment often finds it more difficult to return to productive employment, the main reasons being that employers may prefer younger employees, that their skills may have depreciated over time, and the perception, not always justified, that they are harder to train and are less flexible.

The ETC has come up with a scheme that effectively targets the needs of this segment through a set of incentives aimed at both employers and prospective employees.

This scheme breaks new ground because it is the first time that there is a direct collaboration between the private and public sector on such matters. Those registering for this scheme benefit from a training period during which they are trained in a variety of skills. This is followed by another training period where they can specialise in a particular skill, for example, caring skills. The candidates are given a full wage during this period and are, in fact, employed with a management company. Following this phase, efforts are made for them to be placed in a company in the private sector.

Once a placement is found following normal recruitment procedures, the employer has six months' time to decide whether to retain the employee. The employer benefits during this phase because the employee's wage will be issued by ETC through the management company. The employer also benefits from a subsidy to wages during the successive three years of employment.

As the Minister of Social Policy, Dr Lawrence Gonzi, rightly pointed out during the launch of the scheme, it is expensive, and reflects a commitment on the government's part to offer opportunities to this particular segment of the unemployed.

However, it is money well spent. The scheme is addressing a social issue as well as serving to upgrade human resources. The costs are partially offset by the fact that the participants will naturally not be eligible to unemployment benefits since they would be earning a wage.

The minister also noted the low number of applicants for this scheme. Out of 1,300 eligible persons, fewer than a hundred showed interest so far.

This raises a number of questions about the sincerity of those seeking employment. The main reason for registering for work should be to seek employment, not to obtain unemployment benefits.

It is generally accepted that not all those registering for work, and receiving unemployment benefits are actually unemployed or have any real interest in joining the ranks of the gainfully occupied. This is definitely a phenomenon that requires further study and action.

Another important initiative taken by the ETC to minimise structural unemployment has been the publication of the employment barometer.

The barometer looks at the labour market from the demand side, and seeks to identify skills gaps and generate employment projections through a survey among a sample of employers. The information is useful both on a macroeconomic level and also to individual companies.

These initiatives are all instrumental in developing Malta's human resources to their full potential, and of great benefit to employers and the economy in general.

(Mr Farrugia is also a board member of the Employment and Training Corporation).