With more than 10,000 job vacancies available last year, it sounds baffling that 6,000 people were out of work claiming unemployment benefits.
Taxpayers want reassurances their taxes are not funding a person’s unemployed lifestyle
There is no one reason for this apparent inconsistency, highlighted in a study on the social welfare system commissioned by the Union Ħaddiema Magħqudin.
But one issue does stand out. The difference between what an individual takes home in welfare benefits is only a couple of euros less than what he would earn if employed on a minimum wage.
This minimal difference reduces the incentive for people to work, according to UĦM general secretary Josef Vella. “The problem is that unemployed people are comforted by guaranteed benefits.”
The same difficulty had cropped up in a study on single mothers conducted by the Employment and Training Corporation five years ago.
The study had found that many single parents with a low level of education preferred not to work because the benefits provided them with security, which a job did not.
Most single mothers interviewed for the study did not expect to earn much more than they received in benefits and insisted it was still not enough to cater for any new expenses they incurred for childcare because of their new job.
The UĦM report drawn up by two economists found that Malta spends €19 million on unemployment assistance, €33 million on social aid and €12.7 million on help to single unmarried parents yearly.
Addressing this problem is not a straightforward job.
Charles Pace, a senior lecturer at the University of Malta’s social policy department, described it as “a dilemma”.
“A country that has enough wealth can decide to increase the minimum wage but there are very few of these countries left today and businesses will complain of higher costs,” he said.
An alternative to making work pay more is to decrease the unemployment benefit. But this carried its risks, Dr Pace noted. “Beneficiaries may end up in a more precarious situation, especially those who have dependent children.”
The solution may very well lie elsewhere. Providing the unemployed with training courses and stricter checks on beneficiaries was one way of tackling the problem, Dr Pace said.
Business analyst John Cassar White subscribed to the same solution. The emphasis should not be on quantifying the minimum wage or benefits, he said.
“Taxpayers want reassurances their taxes are not funding a person’s unemployed lifestyle, which is a veritable risk. New methods have to be devised to encourage people to find work, including retraining for long-term employability with penalties if people refuse job offers.”
Another solution could be to gradually reduce the welfare benefit over a period of months rather than removing it all at once if the individual finds a job.
“This solution was adopted in the UK and it highlights the need to be creative in addressing the problems associated with people on long-term welfare assistance,” Mr Cassar White said.
Malta had a strong social model but it had to be financed and this could only be done if more people entered productive labour, he added.
The onus was also on governments to review social benefits as time passed.
“A social measure might have been adequate at a certain period but it has to be updated because people get used to the loopholes and circumstances change,” Mr Cassar White said.
The study and the UĦM’s proposal for an active labour market policy through which investment is made to train employees will be discussed in depth at a business breakfast on July 25.
ksansone@timesofmalta.com