Profits have surged but wages have grown slowly, economist says

Wages have not increased at the same rate as profits at a time when the economy is passing through “extraordinary growth”, economist Philip von Brockdorff said.

The increase in profits was “disproportionate” when compared to wage growth in the last years, he told a business breakfast organised by the Nationalist Party to mark Workers’ Day. The audience was made up of social partners, party officials and activists.

Brockdorff anticipated that economic growth was expected to persist in the years to come but cautioned about the uncertainty that may be caused by voices in Europe pushing for tax harmonisation.

He said growth was creating jobs, generating wealth and was at the heart of the building boom that has also led to higher property and rental prices. However, the phenomenon was also leading to precarious jobs, especially among foreign workers who are not unionised.

The increase in population required better planning to address infrastructural problems, he added.

Brockdorff also called for a national discussion on the impact of artificial intelligence on the workplace and the demands on new skills this will create. “This is a debate that has not even started in Malta,” he cautioned.

Social cohesion

The call for long-term planning was reiterated by Malta Employers’ Association director general Joe Farrugia, another guest speaker.

With a resident population fast moving towards the 750,000 mark in a few years’ time, the country needs a strategy on integration, Farrugia said.

Policymakers had to anticipate demographic change to address economic, social and infrastructural challenges caused by a growing resident foreign population, he added.

Farrugia said the number of foreign workers in Malta, which at the latest count totalled 43,000, has surpassed the number of workers employed in the public sector. And the numbers were likely to continue growing as a shortage of labour supply was being felt across all economic sectors, he noted.

Farrugia said the growth in population should spur policymakers to question whether the country’s infrastructure, including waste management, hospitals, schools, the sewage system, roads and open spaces, could cater for the influx.

Farrugia emphasised this was not just about the economy and jobs, but also a matter of social cohesion.

“The country needs a strategy on integration to avoid ghettoization,” he said, calling for a long-term strategy to address the situation.

Back to the 1530s

The influx of foreign workers was a factor raised by other speakers in the event, not least sociology professor Godfrey Baldacchino, who said the closest Malta ever got to the current situation was when the Knights landed on the island in the 1530s.

“At the time the Knights represented a sudden influx of foreigners on what was largely an undeveloped, ‘desert’ island,” Baldacchino said, adding that it was only after the Great Siege that the Knights decided to make Malta their permanent home and invest in a new city.

Baldacchino said discussing the phenomenon was important and did not imply that those raising concerns were against foreigners.

The sociologist noted that until 1970 Malta’s history was one of emigration. “We had special schemes that paid Maltese to leave the island.”

Baldacchino said today’s phenomenon was a complete reversal of Malta’s history, noting that the population increase was contributing to more traffic, more births, an increase in smoking, higher rents and property prices.

However, he also noted that foreigners were also contributing to the higher use of bicycles, public transport, the creation of ethnic shops and restaurants, and pressure on the Maltese language as people resorted more to the use of English to be able to communicate with foreigners.

Baldacchino said the importation of foreign workers was an easy reply to the shortages in labour supply, adding that there were still too many women of working age who were inactive. He also proposed schemes that encouraged pensioners to continue working while receiving their pension. 

Other interventions from the floor included Joe Woods, who urged the PN to first craft its vision before laying out its plan.

“A tribe without a vision will perish. This movement has to generate a vision and translate it into a workable plan. It had a vision in the past to achieve independence and join the EU, and it needs to create one now to understand where it wants the country to go,” Woods said, as he joined calls for more discussion on future technology and its impact on society, jobs and education.

Guest speakers also included industrial relations expert Gejtu Vella and the head of the University of Malta's public policy department Anne Marie Thake.

Read also: Malta's identity under pressure by foreign influx, Adrian Delia cautions