The last six months were marked by a new cycle of discussions and negotiations between the Maltese government and the social partners. The process went in the right direction of setting Malta's priorities for 2005 and the mechanism for implementing reforms.
One issue in the FOI's agenda is to accelerate positive developments in the labour market that encourage employers to hire more labour. Generally, in the last decade, Malta has performed poorly in labour market developments when compared to other EU and accession countries.
The weak overall economic performance in the past seven years has further accentuated existing problems.
The benchmarks that have been set by the Lisbon Strategy aim for a more positive labour market performance, and implicitly necessitate more serious efforts by Malta in this area.
For 2003 the figures indicate an employment rate of 54.2% and a female employment or participation rate of 33.7%; the rates represent the age bracket of 15 to 64 years.
Both figures are a far cry from the Lisbon targets of 70% and 60%, respectively, by 2010. In itself this does not mean that Malta is the only country that has not yet reached these targets or that these targets must be absolutely met in the next couple of years.
However, benchmarking Malta's figures for 2003 with those of EU and accession countries shows that Malta is lagging far behind nearly all the countries considered. The figures evidently signal that Malta must create a more competitive labour market.
A competitive labour market depends on various factors that are in many ways interlinked. The concept demands the creation of more and better jobs, resulting from modernised labour market laws, and an improved and a more labour market-oriented educational system.
Controlled labour importation could be another important policy option for the labour market in areas where demand for certain type of workers exceeds supply, such as in the construction industry.
The overall strategy must reconcile wages, productivity, local labour market conditions, tax and benefit reforms, labour market policies and regulations, education and training.
The implementation process becomes more urgent when one benchmarks Malta's performance on early school leaver rate (48.2%) and the adult participation rate in education and training (4.2%).
Malta registers one of the more disappointing performances in the EU. More negative indications emerge from the trends observed for the local graduate population. The supply rate of graduates in science and technology, engineering, manufacturing and construction is very low in terms of the total graduate population.
These trends are creating a general shortage or low supply for sectors in expansion, for example the pharmaceutical sector, or other sectors that are becoming more knowledge-intensive.
The FOI acknowledges that shortages are also being felt in the unskilled or semi-skilled grades as well, especially in the construction sector. The federation is therefore encouraging government to reform the educational system and support those enterprises that have the capacity for training, to undertake training of more workers than required.
The FOI urges Government to direct the development of the labour market to a path that enhances competitiveness of local enterprises. In this sense the country must realise that increases in wages and salaries must not be benchmarked with inflation but with increases in national productivity.
On the other hand tax disincentives to work, especially in the case of women, must be removed.
In a nutshell, although this article has not been exhaustive in terms of labour market issues in a Lisbon Agenda perspective, one can conclude that the current situation asks for a balance in Malta's labour market that complements national policies for enhancing Malta's competitiveness.
Mr Caruana is an FOI executive