Prime Minister Fenech Adami initially reacted to the increasing uproar about the problem of unemployment and lack of jobs by flippantly depicting as "realism" the current state of affairs. Who does he think he is kidding? Thankfully, after all the social partners, not to mention the Labour opposition, took him to task, he is being more realistic as to what his government needs to do.
There is spin, and there is substance. Fifteen years ago Dr Fenech Adami governed Malta with a staff of 155 people, deciding policy by sifting ideas from the public service. Today he governs with a staff of 280 or so and policy is decided primarily by its ability to raise the government's re-election prospects.
That is not a partisan comment; it is just as true of the Labour opposition. On both sides, the spin masters now control policy formulation. Policies that help win elections are seized on. Those that merely tackle major social and economic problems are discarded.
How else to explain our failure to tackle the persistence of unemployment and underemployment in a high-growth economy? In 2002, Malta produced three times as much GDP and almost 280 per cent more goods and market services than we did in 1987. Yet, just over 12 per cent more people had jobs while our population grew by only 11 per cent.
In this long period of economic growth, the total hours worked in the economy has only moderately outpaced population growth. While the population has grown at an average annual rate of 0.7 per cent, the number of gainfully-occupied has increased 0.8 per cent per annum. Underemployment remains rampant. Just 58.5 per cent of the population of working age (15-64 years) is economically active, way way down from the EU average of 80.5 per cent. The EU's employment strategy aims to raise from 64 per cent to 70 per cent the number of people of working age in employment (Malta: currently 54.6 per cent).
Last December's snapshot of employment and joblessness by the National Statistics Office found that:
¤ 10,875 people (6.8 per cent of the labour force) were unemployed.
¤ 4,336 (almost three per cent of the employed) were working full-time with reduced hours - underemployed.
¤ 9,034 (six per cent of the employed) were part-time workers.
¤ 4,638 (42.6 per cent of all unemployed) were "discouraged jobseekers" - people who did not even register for work.
¤ 2,640 (24.3 per cent of the unemployed) were "hopeful jobseekers" - registering for employment even though they do not receive unemployment benefit or other assistance.
¤ 6,710 (61.7 per cent of the unemployed) had previously been working.
¤ 6,864 (63.1 per cent of the unemployed) had been seeking a job for more than six months.
¤ 111,860 people (41.5 per cent of the people of working age) were economically inactive.
If one excludes those who are studying and those who are ill (some 32,470), that leaves 84,290 people who could potentially enter the labour force. Hazarding a guess that half of them would want to stay at home and manage the household, that would leave some 42,000 who could become economically active. At the net job-creation rate for the last 15 years, it would take us 42 years to give them jobs!
Yet, you find people like Marisa Micallef Leyson almost invoking hard times and a recession (January 27) because she seems to believe that would teach the Labour Party and the General Workers' Union a lesson! She doubts whether they really have the workers' interests at heart, at the same time that the gist of her article was that our work ethos would surely change if more businesses were to close down, more people were to lose jobs and homeless people and separated couples were to increase in numbers like they did in the UK. That is just cream on the bun, by the way, as important as people being less inclined to indulge in "frivolous" car trips. Amazing!
Did it occur to Ms Micallef Leyson that a major reason that our GDP and direct production have increased so much is because workers are more productive and yield more value-added? Isn't that an indication of a better work ethos? Is she aware that, according to the latest labour force survey, there are 3,300 more people without jobs than there are officially unemployed? It is a well-known economic fact that the labour supply and the activity rate in a country are very much conditioned by the number of jobs available. When an economy is performing at well below its potential - something we have heard ad nauseam from our Central Bank governor - supply responds to demand. Our underemployment would undergo a dramatic improvement if our economic growth were to be job-led.
I still come across people who claim that most of our unemployment is fictitious. Many government officials and their political masters would have us believe that nearly everybody in Malta who wants to work can do so. The real unemployed are just a couple of thousand and all the others are mere scroungers who know how to beat the system. Give me a break, will you? Only Ms Micallef Leyson can bring off spin like that.
Even in the prime working age group (25-54), NSO reports that in 2002 jobless men were 6.7 per cent of the population of working age while jobless women were 33.6 per cent of the population. That compared, according to the OECD Employment Outlook, with just six per cent and 14 per cent in the world leader, Iceland.
For older would-be workers, it is far worse. In the 55-64 age group, 72 per cent of Maltese men and women were jobless, compared with just 13 per cent in Iceland!
After so much growth, an astonishingly large number of Maltese remain without work. But worse: An astonishingly large number of Maltese families remain without work.
The real issue is why. Why has Malta enjoyed so much growth in output for so little growth in employment? And why has that growth in employment been concentrated in multi-job households rather than jobless households?
I don't think it makes sense to blame lack of demand. Malta's GDP at factor cost has grown by 7.7 per cent per annum, helped no doubt by a 15-year boom of borrowing and spending. If that has not lifted jobless or one-job families into jobs, it is because employers think they would cost the business more than they would add.
Several factors underlie that hard judgment. Countries used to have full employment in the past because bosses then saw providing jobs as their social obligation and were not facing the kind of competition that made that thinking dangerous. Wages were cheap and non-wage costs minimal.
That is no longer true. Managers now see their role as being to provide profits to shareholders. Solid rises in the minimum wage have cost jobs. And the non-wage costs of employment have risen out of sight.
Solving unemployment means tackling wage growth, or non-wage costs, or both. One possible way would be to hold down minimum wages, and give low-income workers tax credits instead. Their wages would fall but their incomes would not. A second approach would be to attack non-wage costs. I, for one, would raise the average VAT rate to 20 per cent, hike it even higher for luxury goods, reduce the number of goods and services which are exempted from it and drastically reduce employers' social security contributions, which are nothing but a tax on jobs. How's that for some "intelligent" ideas? Best of all, do all that and upgrade training and wage subsidies to help jobless families find work and keep it.
In two pieces I contributed to The Sunday Times (April 28/May 5, 2002) under the heading A Jobs Strategy for Malta, I had written that "in the light of Malta's current and forecast economic, demographic and labour market situation, the broad strategy should be to bring about an effective structural reform of the labour market and to ensure that new employment opportunities are exploited in a sustainable way".
I am no prophet. Many others had also read the signs and suggested that all was not well on the employment front and that job creation should go right to the top of the country's agenda. But that required ministers and their apologists to focus on substance, not spin.