Putting Malta's Future skills requirments in the picture

By Impetus Europe Chairman Mr. Joseph F.X. Zahra

An address by MISCO Managing Director, and Impetus Europe Chairman, Joseph FX Zahra, an economist and former Chairman of the National Commission for Higher Education, during a National Conference on "Skills for the Future" held on the 19th September 2008 at the Dolmen Resort Hotel Bugibba.

September 2008

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PUTTING MALTA'S FUTURE SKILLS REQUIREMENTS IN THE PICTURE


There is little scope today for long discussions to convince that a countrys productive capacity is a direct function of vocational and academic skills. The fundamental source of a countrys economic prosperity and well being of its citizens is nowadays widely accepted to be the level of skills present in the national workforce. This economic reality is even more pronounced in small island states, especially to Malta; where the only factor donated my Mother Earth is restricted to the human resource.

Four years after EU accession, the claim that the labour market is proving to be very dynamic is coming from every sector. People are constantly changing their jobs, learning new skills, moving in and out of the local labour force and changing the hours they work. Simultaneously, enterprises are being born, others are dying, and some of them are reshaping their size of their respective manpower. The recruitment of new strategic skills and training existing staff with the required incremental skills is increasingly becoming every days business.

The era of globalisation contributed to a fast-changing and increasingly competitive world. Operating within this reality, policymakers amplified the role of tertiary and vocational education in equipping the labour force with appropriate and relevant skills, in stimulating innovation and supporting productivity. Modern high-value added industries are nowadays characterised by high outlays on efficient capital and technology. These trends demand a more highly skilled workforce and a drive towards a more knowledge-based society.


Our Goal

These developments are currently seen at the helm of Maltas strategy to reshape the structure of its economy by exploiting opportunities in the services and research-based sectors. The Governments Vision 2015 for Malta highlights the countrys goal to establish itself as centre of excellence by 2015 in a number of high value-added sectors, namely in information and communication technology (ICT), health services, financial intermediation, international education services, aeronautical engineering, renewable energy sources, maritime logistics, audiovisual and tourism sectors. Meanwhile, emerging sectors marked with successful economic performance in recent years both in terms of output and employment, rest at the heart of the countrys strategy to keep on fostering their activities in Malta. Cases in point are remote gaming operations and the pharmaceutical sectors, just to mention a few.

It is clear that increased investment in human resources development and the need to produce a close match between supply and demand for skills are paramount in order to meet the set objectives. A well-skilled future is one where enterprises are encouraged to use sophisticated, high-productivity strategies, confident they can find the necessary high-quality workforce to match. This is the direction we have to take in order to safeguard Maltas future competitiveness. However, all developed economies are faced with the challenges of maintaining sufficient or optimal investment in training and education, while matching the supply of training to the type of demand. No country has a perfect market and imperfections pose the challenge of producing a close match between supply and demand for skills. The need to anticipate the skill requirements and skill gaps in an economy is therefore a must. Furthermore, attention on technological changes and demographic challenges for our country are vital to mitigate the risk that the current pace of economic expansion will be dented in the near future.


Past and Current Trends

Official figures for Malta show that the structural composition and the recent developments in the local labour market are very well synchronised with the most advanced economies in the EU. Since the turn of the century, where Maltas preparations for membership were at full swing, a constant shift was reported towards a fast growing services sector, away from traditional sectors namely manufacturing and the primary sector. Their share in total employment reported a 7% drop between 2001 levels and the first quarter of the current year, to make up for 20% of total employment in Malta. Meanwhile, the construction sector reported a modest growth in its share by half a percentage point, with its share constantly hovering around 7% of total employment. Hence, the services sector in Malta today accounts for almost three quarters of the gainfully occupied, with the largest growth in shares reported in business and other activities, particularly in banking and finance, insurance, computing and IT services, professional and other related business services.

A similar picture is portrayed when assessing labour market developments, in terms of employment change by broad sector. The manufacturing sector experienced the largest negative employment trend since EU membership, with a drop of almost 4,200 employees within the sector. Although on a much lesser scale, the primary sector similarly reported a drop in employment. On the contrary, the very good performance in the local residential property market recorded during the past years, partly explains the employment growth in the construction sector by 1,500 jobs during the same period. Since Malta opted for full membership in the EU, the greatest expansion was recorded in high value added sectors by far. Almost 13,000 more positions were created in services, of which more than half were created in business and other related professional activities. Distribution and transport, which includes the hotel and catering sector, almost contributed to another 5,000 jobs whilst non-marketed services, namely public administration, education and health saw their stake rising by a further 1,000. These trends are clearly a result of policies being gradually implemented in achieving the Lisbon Goal.

Despite all these positive developments, total employment levels in Malta are accounting for just 55% of the working age population. The latter is remarkably low compared to the EU average and policy measures to address this shortfall need to gain more momentum in the years to come. The low employment rate is mainly a result of a very weak female participation rate of a mere 36%, compared to 73% of males. Moreover, Malta is reporting a very low employment rate for persons over 55 years of age, equivalent to 15% of this working age group. This fact is explained by the early labour force departure age and up to last year tax incentives for people to keep on participating in the labour market after retirement age were inexistent.

Projecting future skills for Malta

The current trends are projected to persist in the forthcoming future. Taking into account the impact of technological change, demographic factors and trends in the EU in general, around 9,000 additional new jobs are to be created in Malta by 2015, despite some further losses in the primary and manufacturing sectors. Considering the 5,600 new jobs expected to be created with the Smart City project, the projected figure is highly conservative. Over and above these levels, other jobs will be created to replace workers who retire or leave the labour market. As a matter of fact, the total number of job openings would definitely be higher than the quoted figure. The positive trends experienced in the construction sector during the past years are expected to flatten with less than 500 new jobs to be created over the time horizon being reviewed. Hence, it is expected that labour demand in the coming years will be created within the services sector, with 3/5 of the new jobs created would be in business and professional services, particularly in financial services and ICT. The remaining jobs are projected in the distribution and transport sector, which includes hotels and catering, and to a lesser extend in non-marketed services namely health and education.

The projected sectoral changes just highlighted, will have significant implications for occupational skills needed in the future. Factoring these structural changes, forecasts for Malta show that by 2015, demand for highly skilled occupations will grow by 11%; low skilled non-manual occupations are expected to increase by 7% and elementary occupations by a significant 30% increase. On the contrary, a 2% drop in demand is projected for skilled manual occupations.

These medium-term forecasts imply that by 2015 labour demand in Malta is expected to grow by 6% over the March 2008 figure. This means an average annual increase of almost 1% in gainfully occupied persons, where during the same period the working age population of Malta is projected to decline by 3,000. These trends highlight challenges that have to be addressed in the years to come. The Lisbon strategy of increasing Europes target on employment rate was set at 70%. In a status quo policy scenario, if Malta had to target a conservative increase in its employment rate to 60%, from its current 55% by 2015, a shortage of more than 5,000 people is projected in the local workforce, due to demographic developments and potential skill gaps.

Task Ahead

Based on the recent trends and forecasts presented, a number of challenges are clearly envisaged to meet future skills requirements. This calls for an urgent need of an ongoing strategic and policy reforms in our education system. Our ambitious objectives clearly allow no room for complacency. The public announcement made recently that the Government is planning to invest around 41.4 million euro on education, to be financed from the European Regional Development Fund, offers a partial solution. MCAST and international education services have a pivotal role to play for our country to meet the set goals. Nevertheless, our future higher education system will definitely need more investment on infrastructural projects to provide students with the latest technological needs and an environment conducive to their personal development.

MCAST is projected to undergo further transformation in the coming years to better meet future skills requirements, especially in sectors such as the ICT and the airline industry. The Colleges philosophy on education practices, to provide a mixture of theory and hands on experience, are nowadays considered crucial in the countrys drive to increase the general student enrolment rate by offering a different route to students to further enhance their skills. Moreover, MCASTs international office is directly related to all EU programmes that promote the mobility of young people, students, teachers and trainers. These programmes include Leonardo da Vinci, Socrates and YOUTH, aimed specifically at students, workers and teachers to support innovation within vocational and technical education.

International education services, with private universities setting up base in Malta, increase the countrys exposure as a recognized international centre of learning excellence. The latter brings about a lot of advantages, such as attracting the best students to further their studies and can be potentially absorbed in the local labour market, providing a rich exchange of ideas with the regions cadre of scientists, professionals, and government officials. Once Malta will become renowned as an international research centre, it can promote itself as a regional meeting ground for research and training in areas of specialisation. Moreover, there are both direct and indirect economic benefits to be yielded to the Maltese economy from this professional service.

Continuing training and lifelong learning must contribute to a process that enables people to adjust their skills constantly to an on-going structural labour market change. The challenge of producing a close match between supply and demand for skills becomes as important priority as raising the overall level of investment in skills. This should not be interpreted that our higher education system needs to attempt to predict every future skill vacancy and then train someone to fill it in. Preferably we should have in place effective systems for quickly identifying emerging trends and our education system quickly responding in providing higher-level skills that are growing in demand.

Three mechanisms are usually used in advanced economies to align the higher education and vocational training with skills needs and shortages to safeguard future competitiveness; namely, (1) Governments policy to create a network organisation for education; (2) key elements of civil society, mainly social partners; and (3) the market mechanism. It is paramount that these three mechanisms should be in perfect coordination for directing supply of skills to match with demand created by the market.

At the same time, such set-up could be used to find solutions and implement strategies that reduce the flow of the high number of early school leavers and drop-outs in Malta, to increase employment rate through a higher participation of women in the labour market and give further incentives to old workers to delay their retirement. Participation levels are an important measure of success within the system. Moreover, comprehensive skill plans should be maintained to increase the supply of people in areas projected to be source of the skill gap, particularly science and technology. Sustaining vocational institutes, namely MCAST and possibly others, and increasing them at tertiary level could be another feasible catalyst for reform. Already existing incentives available for updating knowledge and skills through ETC funded courses and other programmes supported by the constituted bodies should be prolonged. Furthermore, the countrys efforts to improve the effectiveness and efficiency of higher education could be amplified by ensuring a continuous improvement in learning processes and contents, enhancing evaluation and quality assurance of education and training provision, together by guaranteeing professional development and status of teachers and trainers.

Last but not least, it is important to factor in the reality of a shrinking workforce in the coming years and it is important to recognise that all the recommendations just mentioned could not be enough to alleviate a major workforce shortage. Migration could be considered a card on the table to cater for the mismatch and proper incentive formulation could be looked at to attract immigrants to have the right skills.

Conclusion

Although projected trends highlight challenges for future skill needs to be met and the way forward is by far not an easy task, discouragement is not a wise option. If we had to stop and reflect a second on the point of departure of this country, Malta proudly managed to score an outstanding performance in its labour market. Looking way back in the 60s, when Malta earned its independence and the departure of the British military left a vacuum in the local economy, this country excelled in the strategies adopted over the years to shift its relevance from a military one to an independent and developed market economy we are all living in today as full members of the EU. The challenges ahead in meeting future skills requirements, should therefore be seen in light of the afore-mentioned track record and encourage all those present to collectively work and build on the success we managed to attain together as a nation.

BIBLIOGRAPHY

CEDEFOP (2008) Future Skill Needs in Europe, Medium-term forecast, Office for Official Publications of the European Communities

CEDEFOP (2008) Future Skill Needs in Europe, Focus on 2020, Office for Official Publications of the European Communities

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Jack Keating (2006) Matching supply and demand: International perspectives, NCVER on behalf of Australian Government

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Sue Richardson and Richard Teese (2006) A well-skilled future, NCVER on behalf of Australian Government