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Growth driven by foreign workers - Joseph Zahra

I cannot understand on what did Prime Minister Joseph Muscat base his assertion that Malta’s economic growth is not being driven by population increases. Maybe he was thinking of local population increases, which are meagre, but not the growth in the number of foreigners, which runs into thousands every year.

In this regard, it seems he does not see eye to eye with Finance Minister Edward Scicluna who, in a pre-Budget consultation meeting (Times of Malta, September 11) was quoted as saying that “Malta’s booming economy could not have been possible without the influx of foreign workers. Without these workers, the labour market would have tightened, leading to rising wages and an uncompetitive economy”.

In a very interesting article published in the Central Bank of Malta’s Quarterly Review 2016, headed ‘Assessing the economic impact of foreign workers in Malta”, there is reference to the increase in the number of foreign workers prior after our accession to the European Union and how these affected our labour market.

The author writes about the contribution to potential growth of foreign workers “increasing over time from 0.2 percentage points in the pre-accession period to 0.5 percentage points in the post-accession period till the economic downturn”. The article notes that “in the following five years (2010 to 2014), despite the doubling of the relative share of foreign workers in total employment, their relative contribution to potential growth is estimated to have risen to just over 0.6 percentage points”. This when there were about 20,000 foreign workers. The figure today is over 50,000 and is bound to increase if the economy is to sustain its overall growth through population increases.

Six years on, this government does not seem to have an economic plan

I cannot tell what such an article will say today following the big influx of foreign workers over the past four years.

What is worrying is that foreign workers contribute towards keeping wages low. This was admitted by the Finance Minister when he said that “without these [foreign] workers, the labour market would have tightened, leading to rising wages and an uncompetitive economy”.

The Central Bank Review article notes that “besides the supply side impact of foreign workers, another important consideration is their effect on wages and the demand for labour. While the rise in the share of foreign workers between 2010 and 2014 coincided with a drop in wage growth, the latter is similar to that experienced between 2002 and 2006, when the rise of foreign workers was much more muted”.

The truth about foreign workers is that their numbers decline during an economic downturn.

This happened following the economic downturn of 2008, which was more sharply felt by foreign employees. And that is how it should be because, in an economic downturn, the government must first ensure Maltese worker’s employment.

In the absence of serious economic and financial plans for our country, the logical answer for this government is more foreign workers. These add up to the government’s finance as they contribute much more than they receive, inflate the labour market, lower wages and, thus, keep the economy competitive to the detriment of Maltese workers. What better result for a government devoid of ideas!

The end result is that, as rightly declared by Opposition leader Adrian Delia in his reply to the Budget speech, we have a government that is enhancing economic growth through an increase in the population and not by an increase in production.

This is amply clear from the seasonally adjusted industrial production statistics published by Eurostat on September 12. In July 2018, Malta registered the largest decrease among EU member states on a month-to-month basis (-6.3 per cent).

On an annual basis, Malta also had the worst result (-6.4 per cent). In this regard, we surely are not the best in Europe.

Six years on, this government does not seem to have an economic plan.

The only new feature in the government’s economic plans is the Individual Investor Programme (the selling of our citizenship). The IIP, together with population growth through the importation of foreign workers, will not be enough to keep the economy on the right track at a time when the going will not be so good.

Joseph Zahra is a former editor of the Nationalist Party daily In-Nazzjon Tagħna.

This is a Times of Malta print opinion piece

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