Gozo’s public sector employment weakens long-term growth

Gozo’s ever-increasing number of public sector employees could lead to weakened long-term growth prospects for Malta’s sister island, the Gozo Regional Development Authority has warned.

It reached this assessment after a review of Gozo’s public sector employment trends between 2013 and 2022. The authority acknowledged that public sector jobs are often associated with more flexible working conditions, which makes them more attractive for those wanting to engage in part-time work.

“Many Gozitans seek additional sources of income outside their main job, which can make the flexible nature of public sector work more appealing,” the GRDA noted. In fact, NSO data shows that secondary part-time jobs account for as much as 19% of total jobs in Gozo, compared to Malta’s 11%.

“A significant portion of these secondary part-time positions in Gozo are attributed to self-employment,” the GRDA outlined, adding that between 2013 and 2022, secondary part-time employment increased at a higher rate in Gozo than in Malta.

The GRDA said the “high share of public sector employment might dampen long term growth prospects.” The authority noted how studies show that over-reliance on public sector jobs can create “distortionary effects” such as inefficient resource allocation and lower worker productivity.

Using a model, the GRDA studied the effect of a gradual increase of 1,000 employees over a 10-year period under two scenarios, with the first being an increase in employment within the public sector, and the second being within the private sector.

The exercise showed that the 1000-employee increase in the public sector would result in a 4.9% rise in GDP, while worker productivity would decline over a decade. Meanwhile, the same rise in employees in the private sector would lead to an 8.8% increase in GDP, while worker productivity would increase by 3.1%.

The GRDA notes that further studies show that a high share of public sector employment could crowd out private investment and employment opportunities, a sentiment that is shared by a number of local social partners.

In its pre-budget document, the Gozo Tourism Association (GTA) underlined that the public sector job conditions mean that competition between the public and private sector is unmatched. “Along the years this lack of Gozitans not interested to pursue a career in the tourism sector has been on the increase and these gaps were mitigated by the influx of foreign workers.”

This, the GTA stated, has “lessened the authenticity of the tourist’s experience,” adding that this has brought about new challenges related to language, integration and other social issues.

In response, the GTA called on government to ensure, “the public sector is no longer in competition with the private sector for the recruitment of employees by offering favourable and unmatchable working conditions.”

Meanwhile, the Malta Chamber of Commerce went a step further in its pre-budget document, stating that overstaffing in the public sector is a reality in Malta as well, as they blasted government for “effectively poaching human resources from the private sector.”

The Chamber’s proposals on the subject include a comprehensive review of all public sector jobs to ensure efficiency and eliminating half days in summer to create fairer working conditions.