The latest publication of the Gozo Regional Development Authority, Perspettivi, included a very interesting article by a senior economist of the Central Bank of Malta, Kurt Sant. The article, ‘Enhancing employment opportunities for Gozitans: The impact of active labour market policies’ looks at how the tapering of social benefits scheme has changed the labour market in Gozo.
Back in 2013, there were over 700 Gozitans registering for work. Gozitan residents constituted 10% of the total registered unemployed population. Today there are around 60 Gozitans registering for work, constituting just 6% of the total amount of jobless persons. The results speak for themselves.
Something big has changed in Gozo’s labour market over the last decade, and the proportion of Gozitans working in the public sector fell as the number of Gozitans working in the private sector doubled. The study of the senior Central Bank economist indicates that the introduction of the tapering of benefits scheme was a major cause of this transformation. Before the tapering of benefits was introduced, Gozitans had a 13% less chance of moving from benefits to work, when compared to Maltese residents. This probably reflected not just the dearth of job opportunities in Gozo, but also the relatively low wages that the available jobs paid. Faced with little financial incentive to work, a lot of Gozitans on benefits opted to stay put.
After the tapering of benefits scheme became operational, the probability of Gozitan residents to move from social benefits to employment surged, so much so that now they are 22.4% less likely than Maltese residents to move back on benefits.
The author concludes that, “Gozitan workers experience a great improvement from the scheme, not only in terms of job-finding rates but also in terms of their job duration”, and that “the scheme can be considered very successful”.
The effectiveness of the active labour market policy schemes introduced over the past decade was also acknowledged in a European Commission report titled ‘Exploratory study: Filling in the knowledge gaps and identifying strengths and challenges in the effectiveness of Member States’ minimum income schemes’. This study noted that “reforms in Malta … had positive results, and more generally, the introduction or enhancement of tapering arrangements seems to be most beneficial to women and households with children”. Malta’s scheme is the most generous in Europe, and there are only seven EU countries that have some form of tapering, but none for more than a year.
When looking at the Maltese case, the European Commission notes that “these changes have resulted in a considerable decrease in spending on social benefits, with savings reported to be in the region of €24 million between 2014 and 2018 alone”. Moreover, the study concludes that “poverty figures have improved dramatically with the severe material deprivation rate falling 6.9 percentage points from 10.2% in 2013 to 3.3% in 2020 and the material deprivation rate falling 11.2 percentage points from 19.9% to 8.7%”. The Commission also reported that “90% of those benefitting from tapered benefits remain in employment after the 3-year period had elapsed”.
The Commission’s study concludes that “the impact of the tapering of benefits scheme in Malta, by far the most ambitious of the reforms, has been assessed as being very positive in terms of enabling transition to employment and reducing poverty”. The results for the other countries were mixed, and this shows that the design of the Maltese scheme is superior.
The social policy reforms introduced in Malta in the past years are not just a major legacy that will benefit Maltese and Gozitan families. Thanks to studies like the European Commission’s, they could also lead to similar reforms across Europe for the benefit of millions of Europeans.
Photo: Malte Luk