Welfare reform:

As the debate on the proposed welfare reform picks up, I would like to present a number of social and demographic considerations. Hopefully, this will give a wider picture of a situation that goes beyond the financial solutions that are sometimes being advocated to redress the welfare gap. These considerations deal with social measures that are aimed at fostering a more balanced society.

Demographic indicators show that the fertility rate of Maltese women has declined significantly in the last decade. Actually, the crude birth rate has fallen from 14.1 in 1993 to 9.9 in 2002. Last year, Malta registered the lowest ever number of live births over the past two decades (NSO news release No. 52/2003).

This trend will have a negative impact on the population growth, and in turn, the Maltese will continue to evolve into an aging population with negative impacts on productivity and the welfare state. In order to face these challenges to the labour market and the welfare state, Malta needs to consider the following measures:

Introducing tax rebates, or bonuses, to encourage larger families; increasing the housing stock for social purposes and increasing the rate of subsidies by the state for social housing for families; and introducing measures to step up the employment rate.

The rise in the birth rate is required to restore the demographic balance between the working age population and the elderly in the long term.

Raising the birth rate will be necessary in order to reproduce the labour force of tomorrow, and in turn, compensate for the generation of baby boomers of post-World War Two. An increasing number of young people will also be required to enter the labour market in the immediate decades to come.

Indeed, an enhanced and consistent economic growth will be essential to ensure sustainability of the welfare state. The national budget should allocate more funds to the Housing Authority so that the housing stock for social purposes and the rate of subsidies could be raised.

In conjunction with this, the state should also consider how to deal with a situation when at the same time that new housing units are being built, we have 20-25 per cent of the existing housing units vacant. Better planning is required to find solutions to the housing issue.

With an employment rate which, according to the December 2001 Labour Force Survey, stands at 54.2 per cent (NSO news release No. 63/2003), Malta has one of the lowest employment rates of the EU member states and candidate countries.

Eurostat structural indicators show that only Bulgaria and Turkey had lower employment rates than Malta in 2001. Raising the employment rate will reduce the working age dependency ratio, boost economic growth and facilitate the sustainability of the welfare system.

By the current trends, the ratio of potential workers to retired persons, which stood at 3.8:1 in 2000, is expected to decline to 3.6:1 in 2005, and to 2.4:1 in the year 2035 ('Prosperity in change, The way forward', Ministry of Economic Services 2003).

Such indicators suggest that unless the employment rate improves, the welfare gap will not be narrowed. To raise the employment rate, more active labour market policies by the Employment and Training Corporation (ETC) for young unemployed and the long-term unemployed are required.

With over 10,000 unemployed (LFS data), it may appear to be evident that the state needs to intervene directly in order to foster supplementary job creation for the long-term unemployed who would have proved themselves to be successful in learning new skills in vocational training during their period of unemployment.

Malta cannot afford to waste its human resources when the private sector will prove to be unable to create full employment.

Enhancing the employment rate of women, which at the current level is extremely low, may also assist in reinforcing the sustainability of the pension system in Malta.

Family-friendly measures have already been introduced in Malta to a significant extent within the public sector. In regard to the private sector, it is important that employer organisations and trade unions engage in more serious negotiations for the introduction of flexitime arrangements that respect the rule of the 40-hour working week for full-time employees.

Such measures may be useful to raise the employment rate of women, while encouraging families not to overlook their function of human reproduction. The purposes of raising the birth rate and the employment rate of women should be reconciled through social policies which enhance the work-life balance and strengthen the sense of responsibility that parents must have in respect of the well-being of their children. And with respect to parental responsibility, one must underline the fact that the presence and involvement of both parents, the mother and father, are essential to healthy child-rearing.

I believe that, in the long-term, the social and labour measures suggested above may be useful to enhance the sustainability of the welfare state and pensions in Malta. Such measures may also be effective in encouraging the work ethic and economic initiative which should underpin a more prosperous and equitable society.