Low-income earners will have their salary topped up in a measure intended to “make work pay” that was unveiled as part of a national employment policy.
The policy will come down heavily on those who persistently refuse job opportunities or seek “nonexistent” vacancies.
Such individuals will no longer receive unemployment benefits.
The government will also overhaul the funding mechanism of maternity leave. The plan is to raise the necessary funds through an increase in the yearly social security contribution payable by employers for all their workers. The policy says this should curb gender discrimination and allow for equal opportunities of career progression.
The measures contained in the policy were unveiled by Prime Minister Joseph Muscat in the presence of representatives of social partners and civil society. Dr Muscat said the measures had the backing of all social partners and emphasised the government’s resolve to implement them within this legislature.
However, he said there would not be a “big-bang approach” but a gradual process, adding that the previous policy had been unveiled 10 years earlier.
“Education and training are the best policy for job creation,” Dr Muscat said.
The policy also focuses on the mismatch in the supply and demand of the labour market. It says that the kind of jobs being sought by 60 per cent of those on the unemployment register represented only 20 per cent of those on the market.
The Prime Minister said it made no sense having some 350 people seeking jobs, say, as pump attendants, when there were only five openings up for grabs. This mismatch had to be addressed through training and education.
At the same time, in cases of certain jobs, like cleaners, where the supply was greater than the demand, employers complained they had to look for foreigners because the Maltese were turning down such offers.
Dr Muscat announced that a Budget proposal to gradually cut unemployment benefits over a three-year period for those who found a job would be extended.
The policy includes a specific chapter on Gozo and calls for the setting up of a Local Employment Development Unit to coordinate initiatives between the public and private sector.
Jobs Plus Programme chairman Clyde Caruana, who gave a detailed presentation of the policy, pointed out that workers’ purchasing power had been on the decline since 2010.
The income of 60 per cent of the workforce had either decreased or remained at the same level of 2004, he said.
He reported that employers were encountering problems as Malta placed fifth from bottom when it came to skilled workers.
The Malta Employers’ Association welcomed the policy describing it as a professional analysis of labour market issues in Malta, with concrete actions to address labour market deficiencies.
However, it said the maternity leave proposal had been a last-minute addition and required further consultation.
It expressed reservations about the impact of extending the payment of unemployment benefits for those who find a job beyond three years.
Employers also raised concern over the increase of about 1,400 employees in the public sector over the past 13 months.
Making work pay
One of the major proposals is based on the concept of what is known as the “reservation wage”.
Jobs Plus Programme chairman Clyde Caruana said this wage reflected the remuneration expected by those on the unemployment register. Anything below that amount would discourage jobless people to seek employment.
The policy cites the example of a 30-year-old, full-time worker with O levels, saying the reservation wage would be of €10,921, some €1,600 over and above the minimum wage.
This figure was based on a survey carried on a sample of about 350 people on the unemployment register.
Mr Caruana told Times of Malta that the amount given through the top-up system had not yet been determined but confirmed that it would largely be based on the reservation wage. He added that those on the minimum wage would benefit the most, especially families who accounted for two-thirds of those at risk of poverty. However, those with a marginally higher income would also benefit, albeit to a lesser degree.
Probed about the funds to sustain the scheme, Mr Caruana said that having a top-up system would, in the long term, cost less than having unemployed people on social benefits.
New funding strategy for maternity leave
Another innovative measure of the policy is to fund the cost of maternity leave by increasing the social security contribution paid by employers.
This means the benefit would no longer be directly linked to female employment because the cost would be spread out across the entire economy.
The policy says that, each year, some 1,700 mothers avail themselves of maternity leave out of some 3,500 who are eligible – 600 are in the public sector and 1,120 in the private sector. The expense for the 14-week benefit is roughly estimated to be €4,500 for each female employee.
The argument being put forward to justify the reform is that it will help to drastically ease any form of indirect gender discrimination.
The increase in the social security contribution has yet to be determined in consultation with the employers but Mr Caruana said this would only equate to a few tens of euros a year for every employee.
He said that the overall impact on the economy would be neutral because it was more about the redistribution of funds than about raising revenue.