We all know we are in a very tight labour market. I meet employers all day, all the time and they all have huge headaches with labour shortages, spiraling wages and trying hard to retain their employees. Some employers operate daily under a great fear that when they open their business in the morning, all employees will turn up, that no one will resign and that no one will leverage the present situation to squeeze a wage increase.
Below please find some numbers which can give an insight to why we are here:-
As can be seen above population growth has in the past year been fueled by net migration. This net migration was the basis of the economic growth we had in recent years. On Average between 2017 – 2019, we had a net migration increase of 17,000 persons per annum, which almost all went towards the increase in the number of persons employed.
Then in 2020, when Covid came about, the number of persons that came to Malta to work, as part of the net migration, reduced with just an addition of almost 6,000 persons between 2020 and 2021. However Malta’s economy grew in 2021 beyond the level achieved in 2019, with a GDP growth of almost 5% in 2021 over the level in 2019. Such a growth would have required that the net migration increase needed would be at least on the level of 10,000 persons, taken on 2018 levels. Add to all the above the 7.6% GDP growth we had in Q1 2022 which further stressed the labour market. This is why employers have now become the new beggars.
In my humble opinion, this labour shortage will be one of the limiting factors which will hamper economic growth going further. Besides the rising costs of various imported materials, the rising shipping costs, disturbances in supply chains, the lack of human resource and spiraling labour costs will have investors think twice whether to invest at this point in time or wait for things to settle down.
Finally, the economy will always find an equilibrium. Until that equilibrium is found, let us hope that the least possible amount of persons (whether employers or employees) get hurt.