An interesting publication of the European Commission is Employment and Social Developments in Europe 2012. It provides a set of data on employment, social trends, poverty, social protection systems, taxation, wage development and skills mismatch across the member states of the European Union.
As such it provides ample scope for comparisons. However, the overall picture is very dismal, with the international financial crisis still around after five years and with the return of the recession and an increase in unemployment. The data of this week, namely that France is in recession and no growth is bring registered in Germany, confirms that the EU economy is still in a very weak position and this is deepening the social crisis.
Temporary and part-time employment are not necessarily a bad thing, as they are often made to be
The main economic messages that emerge from this review are that the divergences between the different parts of the EU are growing: long-term unemployment has increased in most member states; wage developments are critical because they affect disposable incomes but also the cost of production and skills mismatch are an increasing problem.
These economic factors are leading to a number of consequences on the social side.
Social polarisation is on the rise; the risks of entering poverty and of social exclusion have increased; and the welfare state is facing major challenges.
Turning to some specific data, one clearly notes the low level of unemployment Malta has – something which is no longer headline news. However, there are bits of data that do demonstrate certain weaknesses.
For example, Malta’s inactivity rate among the young population is among the lowest in the EU as is the unemployment rate.
On the other hand, the percentage of young people who are not in employment, education and training is just over 10 per cent. This all represents wasted potential.
Another factor that represents wasted potential is that the activity rate in Malta among individuals aged between 25 and 64 years is the highest within the whole of the EU. The issue appears to be exclusively limited to women.
We may feel that temporary employment and part-time employment present negative signals in the labour market. In the whole of the EU, the percentage of part-time employees increased from 15 per cent to 19 per cent over a 10-year span, while the number of temporary employees rose from 12 per cent to 14 per cent.
Holland has a very low unemployment and activity rate. Yet, the percentage of part-time employees and the percentage of temporary employees are among the highest in the EU.
This would seem to indicate that temporary and part-time employment are not necessarily a bad thing, as they are often made to be.
Compensation data also provides food for thought. The tax wedge for a single person without children in Malta is around 23 per cent of the average wage, by far the lowest in the EU.
However, in 2011, Malta was one of two countries (the other being Luxembourg) where productivity went down, resulting in an increase in unit labour cost.
Another element of compensation is the minimum wage. In Malta, the proportion of the minimum wage as a percentage of the mean value of average gross annual earnings stood at around 48 per cent. This is one of the highest in the EU, reflecting a policy of social cohesion that has been followed over the years.
It is worth noting that income distribution in Malta changed very little in the last years. Although there has been an increase in the number of households in the lowest income quartile, the changes in household income across the various income segments have been fairly neutral. This would indicate that income inequality did not change in any significant way.
One final comment is about the duration of a person’s working life.
The retirement age in Malta is currently slowly rising to 65 years. Even so, the average duration of a person’s working life in Malta is among the lowest in the EU.
This has a number of aspects (such as a lower activity rate) and not only the retirement age.
However, the more years a person works, the more that person contributes to the funding of social security expenditure and the less likely that person is to suffer from social exclusion.
It therefore becomes necessary to ensure that employment in Malta continues to grow and we should do all we can to remove any hindrance to employment growth.