KPMG Consultant Tonio Zarb believes that Malta needs to come to terms with its dependence on foreign labour and introduce reforms to keep valuable workers in the country, preventing the high costs of high employee turnover.

“A third of the working population is foreign,” he said, addressing a conference on the property market organised by KPMG and the Property Malta Foundation last week. “That includes knowledge workers, who are not interested in staying in Malta. After a year or two, they leave.”

When this happens, he said, their employers and the wider economy loses productivity.

“We either need to consider them as a part of our economy or not,” he argued, adding that a change in attitude would keep them here, leading to a substantial gain in productivity.

The reasons for their leaving are various. For one, quality of life has decreased drastically over the last years, Mr Zarb points out.

“In 2015, in an expats’ list of 55 countries, we were fifth. Now we are in 46th place. That’s a drastic decrease, and it shows that we need to change something, definitely.”

Contacted by WhosWho.mt for further clarification on how such valuable workers could be enticed to remain in Malta, the former KPMG Senior Partner points to two other issues: work permit renewal and family reunification.

“The way the system treats them, forcing them to face the uncertainty of having their work permit renewed on an annual basis, inevitably makes them wonder, ‘What am I doing here?’”

Meanwhile, such workers often face difficulties in bringing their families over to Malta to live with them.

For businesses, employee turnover has an effect on the bottom line: “It takes a great deal of time and effort to recruit and train when replacing exiting people, particularly so for knowledge workers and professionals. This forces organisations to employ more people than they would otherwise need as they have to make up for the loss in productivity.”

Mr Zarb estimates that the overlap between incoming and outgoing workers amounts to a substantial increase in the expat headcount for companies – adding up to significantly higher costs. On the other hand, adopting a more inclusive approach towards foreign employees would drive down the need for such costly measures.

“We need to provide these workers with the right conditions to prevent them from looking for employment elsewhere,” he says. “Other countries looking to attract these important workers do things very differently, providing them with more certainty.”

On precarious work

Turning to the question of foreign workers on the lower end of the salary scale, often working in construction, hospitality, transportation and catering, Mr Zarb is categorical in his condemnation of business models that depend on the exploitation of workers, saying the tolerance of such practices “does not reflect well on who we are as a country.”

The issue is economic as well as moral, with Mr Zarb arguing that economic growth built on underpaid labour is not sustainable in the long run.

“People should work in decent conditions and be paid a fair wage.”

Beyond GDP

For the former President of the Institute of Financial Services Practitioners, it is evident that a new measure of the country’s economic health is required.

“We need to look at GDP or GVA per capita to measure productivity, as a baseline.”

However, Mr Zarb goes further, pointing to economic models that calculate the cost of things like environmental and infrastructural impacts – costs that are typically considered externalities as they are not captured in the economic indicators currently in use.

“By adjusting GDP downwards to take these ‘externalities’ into account,” he says, “we can look at different industries and properly assess how to increase their productivity,” adding that Malta needs to move from a people-dependent economy to a tech-empowered one.

“We can do this by investing heavily in tech to do more with less.”

Mr Zarb dismisses questions as to the usefulness of a such a measure of economic health if it is not adopted by other countries and is therefore of limited use in comparing the relative strength of the Maltese economy.

“For one, I believe this has been tried elsewhere, but even if it has not, the comparison is not that relevant. New Zealand didn’t worry about this when introducing new ways of measuring quality of life” – a reference to the introduction in 2019 of a Living Standards Dashboard meant to serve as an indicator of the national wellbeing.

“They just did it. If it makes sense, it makes sense.”

The beauty of implementing measures that work, for Mr Zarb, is that measuring adjusted GDP per capita allows for a far greater range of actions.

“For example, investment that serves to decrease negative environmental impacts, or automation measures, will lead to an increase in adjusted GDP per capita. Reducing the downside of development yields a positive statistical result that is currently simply captured as a cost, with the benefits left unquantified.”