Debunking the cheap labour narrative

Once viewed through the lens of scientifically compiled data, the cheap labour economic growth narrative is exposed as nothing more than a fallacy.

One frequently comes across claims that, during the last decade, economic growth in Malta has been fuelled by cheap labour and that today’s economy is characterised by many low-paid workers.

This affirmation is very easy to fact-check. Every quarter, the National Statistics Office (NSO) publishes the results of the Labour Force Survey, that is carried out in line with a cross-country methodology agreed at EU level and checked regularly by Eurostat, the EU’s statistical agency. It breaks down the number of employed by their occupational category and includes data on the average basic monthly salary they earn on average.

The Labour Force Survey data, reproduced in the table below, shows that between the first quarter of 2013 and the first quarter of 2023, the number of workers rose from 148,098 to 247,962. Now, according to the narrative peddled by some who pretend to be economic experts, the bulk of this 100,000 rise in employment was in cheap labour. However, if one looks at how much of this increase was among those employed in elementary occupations, one finds that less than 8%, or 8 out of every 100 additional persons employed, fell in this category. Whereas plant and machine operators and those in elementary occupations constituted 17% of the entire workforce in 2013, this year their share is down to 14%.

By contrast, the number of managers has more than doubled, from 13,165 to 29,148 persons. Similarly, the number of professionals is now 53,379, more than twice the 24,983 professionals who were working in Malta in 2013. The combined share of managers and professionals is now 33% of the entire workforce, up from 26% in 2013. 44 out of every 100 additional person in employment during this decade was either a manager or a professional.

2013 Q12023 Q1
No. of workersAverage basic monthly salary (€)No. Of workersAverage basic monthly salary (€)
Technicians and associate professionals22,1741,39632,1051,844
Clerical support workers20,2051,18130,1591,417
Service and sales workers28,00995945,2031,251
Craft and related trades workers12,9761,19019,0301,528
Plant and machine operators, and assemblers9,7681,12912,9121,437
Elementary occupations14,83090622,7881,189

Source: National Statistics Office – Labour Force Survey

Across the Euro area, 27% of those in employment are either managers or professionals, a much smaller proportion than in Malta. In fact, there are only six Euro area countries where a larger proportion of the workforce is employed in these higher level occupational categories. While in the last decade across the Euro area the share of managers and professionals rose by 4.6 percentage points, in Malta it has risen by 6.4 percentage points. This means that the relative position of Malta has improved over the decade, rather than declined, as many pundits imply in their opinion pieces.

Unfounded claims vs official data

One could argue that it may be true that there are relatively more people employed as managers or professionals, but maybe it is just a question of nomenclature, and that their conditions are not that great. Once again, the Labour Force Survey data clearly show that this is not the case. The average monthly basic salary of a professional has risen from €1,733 in 2013 to €2,471 in 2023. This implies an increase of 43%, more than double the inflation observed over this period. Amongst managers the increase in the monthly basic salary (which excludes bonuses and allowances) was of 34%.

But what about those in elementary occupations? Surely their conditions must have deteriorated, some say. Well, once again, the narrative peddled by certain columnists in the media falls short of what the data show. The basic wage of someone in an elementary occupation is 27% higher than it was in 2013, a rate of increase which is only slightly smaller than that observed in the managerial category.

Once viewed through the lens of scientifically compiled data, the cheap labour economic growth narrative is exposed as nothing more than a fallacy.

Photo credit: Pixabay

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