Another first: Lowest unemployment rate in the Euro Area

Last August Malta was the country with the lowest unemployment rate in the Euro Area. At 3.2%, this rate was the lowest rate ever achieved in our nation’s history. Moreover, this was the first time in history when Malta’s rate was the lowest observed in the Euro Area. In the whole of the European Union, only Czechia managed to register a lower unemployment rate, at 2.9%. 

While many tend to associate countries in the Euro Area with high unemployment rates, there are several countries within this zone that have a track record of very low unemployment. For instance, in mid-2001 when Malta’s unemployment rate was hovering near 8%, in Luxembourg unemployment was just a quarter of that, with the rate not even reaching 2%.

At the time, the Conservative administration used to argue that Malta had virtually no unemployment. However,Malta’s rate was nowhere near the lowest rate in the Euro Area. Before joining the EU, the gap between Malta’s unemployment rate and the best performing economy averaged a substantial 4.5%. Between joining the EU and adopting the euro, the gap narrowed to 2.7%. Following that, the gap narrowed to an average of 2% between 2008 and 2012, mainly as unemployment in the Euro Area rose, while that in Malta the unemployment rate between this period remained stable.

From 2013 onwards, unemployment embarked on a strong downward trend in both the Euro Area and in Malta. However, the decline in Malta was much sharper, so much so that in 2016 Malta’s rate was just 0.1% higher than that in Germany, the country with the lowest unemployment rate in the Euro Area at that time. Even in the summer months of 2017 and 2018, the difference between Malta’s rate and that in Germany nearly disappeared.

With the onset of the pandemic, Malta was initially harder hit than some other Euro Area nations which were less dependent on tourism. But even Germany lost its place as the country with the lowest unemployment rate in the Monetary Union, with the Netherlands taking its place. This probably reflects the more flexible nature of the Dutch labour market and the more frequent use of reduced-hours and part-time work in that country.

At the peak of the pandemic, the gap between the Maltese unemployment rate and the best-performing Euro Area economy reached 1%, or half the gap that was observed during the last Conservative administration. The launch of the economic regeneration plan in June 2020 started to push Malta’s unemployment rate downwards quite rapidly. By the time the Budget for 2021 was being announced the gap between Malta’s unemployment rate and that in the Netherlands had already halved. The gradual recovery of the tourism sector, together with the confidence boost exerted by the success of the vaccination programme, then removed the remaining difference, such that last August Malta’s rate became the lowest in the Euro Area for the first time in history.

The population groups that benefitted the most from the recent decline in unemployment were women and youths. In June 2020 the unemployment rate among Maltese women had jumped to 5.4%. It is now just 2.4%, or less than half the peak, and is the lowest ever recorded in our nation’s history. Among Maltese youths, the drop was of 1% from its peak, with most of the fall observed among young women.

The fact that Malta has achieved such important records in tackling unemployment is testament to the effectiveness of its response to the pandemic. 

The Labour administration not only managed to safeguard the social progress achieved prior to the onset of the pandemic, but even managed to improve on this and achieve even better outcomes. This suggests that the post-pandemic recovery could lead to even more social progress.   

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