The decline of the manufacturing sector has been one of the characteristics of the Maltese economy during the last decade. While in 2002 this sector was employing 26,832 workers (19.4 per cent of the gainfully employed persons), in 2011 the number of employees in this sector amounted to 19,793 (13.2 per cent of the gainful employed). This decline was mostly brought about by closures, downsizing and relocations.
The Maltese economy has moved to a new phase of industrialisation based on higher value economic activities- Saviour Rizzo
The loss of jobs in this sector has been offset by the creation of jobs in other sectors, notably wholesale and retail, which, in employment terms, registered an increase of 3,122 from 2002 to 2011.
Other activities in the service sector, such as the professional, scientific and technical, administrative, education and financial and insurance, also helped to mitigate the loss of jobs in the manufacturing sector. It looks as if a substantial number of these new opportunities of work have spawned a number of micro firms (less than 10 employees). The number of these types of firms in 2002 was 36,778 whereas, in 2010, it was 62,398, representing an increase of 33.3 per cent. Thus, the Maltese economy has moved to a new phase of industrialisation based on higher value economic activities. Most of the jobs lost in the manufacturing industry were in the textile and garment sector, marked with the closure of foreign-owned and export-oriented firms such as Denim Services, VF and Bortex.
In 2002, there were 2,960 employees in this sector whereas in 2008 the number dropped to 690.
The growth of the textile and garment sector is now equated with the initial phase of the process of industrialisation. It has always been operating in a highly competitive world market. The higher cost of labour, often induced by the development in the industrial base of a country, diminishes the comparative advantages of its location in that particular country. This is what has made this sector prone to relocation and there seems to be no way of stalling this process.
The shift towards the service sector and more value added activities marks a different phase in the process of industrialisation.
This shift has brought about a change in the occupational structure and the transition from school to work experienced by many school leavers. A large number of early school leavers without any paper qualifications used to find work in those sectors of manufacturing industry, such as textile and garment, which demanded low-level skills. Though often labelled as school dropouts, most of these youngsters adopted a very diligent approach to their work ethic. Through the financial incentives very often offered in this industry, their earnings, though by no means making them highly affluent, enabled them to go beyond the basic needs. Most of the jobs in which they were engaged could be defined as humdrum.
But in this highly unionised workforce pay was above the minimum and conditions of work were standardised. These jobs are now harder to come by because the service industry, while tending to generate highly-lucrative jobs, it also creates very low-paid jobs with poor conditions of work. This dual labour market provides highly-paid and lucrative jobs at one end and precarious and sub-standard jobs at the other. Indeed, this change in the occupational structure, while giving rise to a new upper middle class made up of technicians and other knowledge-based workers in finance, science and administration, has also contributed to an increase in the underclass who have to contend with low pay and precarious work conditions.
If the workers belonging to the latter category are employed in a micro or SME firm operating in the low level service sector, mainly engaged in outsourced or sub-contract work, the prospects of improving their wages may be very slim given that workers in such firms tend to be non-unionised.
The consistent increase in the number of people below the poverty line may be partly due to the poor conditions of work in this low level service work. At this point, it would pertinent to take an extract from a report by the Malta Chamber of Commerce, Enterprise and Industry, entitled The Beauty of Manufacturing, which can be downloaded from its website:
“The beauty of manufacturing is that wages and productivity are not necessarily tied to education level. A person with secondary education can make a middle-class living in the manufacturing sector. By contrast, wages and productivity are much more closely tied to education level in the service sector. A person with secondary education or less will generally find it much harder to advance in the service sector.”
Though by no means implying that we should strive to resuscitate the manufacturing industry to accommodate those with a low level of education, the Chamber has raised a valid point. What it is implying is that the shift in the economy may have made life difficult for a number of job seekers hoping to get a relatively good quality job that would enable them to lead a decent life without state support if possible.
A pertinent question would be how the educational system is responding to these changes in the labour market, which are adversely affecting a number of school leavers. Have forecasts been made? Admittedly, forecasting has to be made in very broad terms because education tends to suffer from the problem of escalation in the sense that when educational plans seem to be meeting the end of actual needs, a deeper level is discovered leading to different needs. This is more so in a labour market operating in an open small economy that is the case in Malta.
These are the problems and questions that the designers of our educational system are being called to address in their effort to adequately respond to this shift in the industrialisation process, which is still ongoing in the Maltese economy.