Malta spends almost €65 million every year on assisting the unemployed, helping unmarried parents and providing other social assistance, without getting any return in increased productivity or competiveness, according to a union chief.
The problem is that unemployed people are comforted by guaranteed benefits
A report commissioned by Union Ħaddiema Magħqudin has revealed that a large amount of money is being spent on assisting around 17,000 people on long-term benefits. Around 9,000 of these are under 40.
UĦM general secretary Josef Vella said the government should introduce an active labour market policy through which investment is made to train employees and improve competitiveness.
“Our social benefits system is being abused and the country needs to look at this with urgency. A lot of money is being wasted when we could use this to train people and increase productivity and competiveness levels,” Mr Vella said, making a case for an active labour market policy.
In 2006, he said, the government reviewed the way people became eligible for an invalidity pension. By increasing the screening process, Malta managed to save some €30 million a year. The same needs to be done with other aspects of social assistance, he insisted.
Malta currently spends €19m on unemployment assistance, €33m on social assistance and €12.7m on assistance to single unmarried parents, totalling some €64.7m.
“The active labour market policy we are proposing brings together all the schemes currently provided to those who need it. We have many programmes, but no policy,” he said. The UĦM is proposing a 10-year plan which would need the backing of the political parties, unions and employers.
The proposal has already been presented to the social partners within the Malta Council for Economic and Social Development and the feedback was positive, he said.
Mr Vella said Malta placed last in investment on improving workers’ skills and training within the EU.
The UĦM is proposing the setting up of a skills council which would map out the skills needed over a period of time and coordinate courses offered by educational institutions to provide the necessary skills.
Moreover, the union is proposing the granting of tax credits to companies to incentivise them to provide training for their workforce.
Research conducted by the two economists who compiled the union report shows that whereas 6,000 people were unemployed last year, there were 10,350 job vacancies, 75 per cent of which were for low to medium-skilled workers.
“What’s happening? We are becoming choosy when we are not really in a position to choose.
“The problem is that unemployed people are comforted by guaranteed benefits. And this is compounded by the fact that these benefits almost equals the minimum wage, giving unemployed people no incentive to look for work,” he said.
In monetary terms, a person on minimum wage receives €158 gross and €142 net a week, after paying national insurance. An inactive person receives €103.49 a week – a difference of just €38.
“If one enters the labour market earning the minimum wage, it’s just for a 97c per hour increase,” he said.
The UĦM will launch the full research on July 25 during a business breakfast, followed by one-to-one meeting with the social partners and political parties. By October, the union hopes to have a document mapping out a common position.
“We are hoping to have a memorandum of understanding signed by the social partners and political parties so as to begin implementing the active labour market policy,” Mr Vella said.