Stuck in the Mud

15^th September 2006
The Malta Independent - Friday Wisdom

There is nothing wrong with the government conducting a wide consultation process to take as wide feedback as possible in shaping its public budget for 2007.

What is wrong is the government giving the impression that it is on top of the economic situation which is reportedly getting better to the extent that the next budget can be expected to turn things round and deliver the bacon in time for the next election. Glossy pictures of young smiling families looking with confidence at the future are a million miles away from the reality that most families are living every day, stressed as they are with their inability to make ends meet through high energy surcharges and little opportunity to increase earnings.

For economic observers who wish to rise above the noise of a single budget and the electoral positioning that it brings – especially if it happens to be, quite likely, the last one before a general election – more robust and meaningful economic data is necessary to understand better why the government’s repeatedly expressed optimism has not rubbed on the negativism prevalent on the high street.

Such data was provided this week by Eurostat in a report about EU Labour Force Survey in 2005. What strikes impartial observers is Malta having an employment participation rate of only 53.9 per cent in the age bracket of 15-64 years. Only Poland performs worse at 52.8 per cent and we are way, way out of the EU-25 average of 63.8 per cent EU-15 average of 65.2 per cent and Euro area average of 63.5 per cent.

While the male participation rate of 73.8 per cent is in line with the average, the female participation rate of just 33.7 per cent is the lowest in all the EU and miles away from the EU average of 55 per cent to 57 per cent. The simple truth is that there cannot be a solid foundation for a sustained increase in our standard of living unless we create the right social environment and the economic opportunities for a much higher female participation in the economy.

Is it any wonder that the countries with the best economic performance in the EU are those that feature the highest level of female participation in the labour force? Denmark leads with 71.9 per cent (more than twice our record) followed by Sweden at 70.4 per cent and The Netherlands at 66.4 per cent. Denmark, Sweden and the Netherlands have the best-balanced macro-economic performance within the EU and beyond.

Why is our record so dismal? Is it just our culture for women to stay at home caring for the family? I very much doubt it. If our culture is changing with regard to church attendance on Sundays it cannot be expected to stay still with regard to females seeking to participate actively in the economy and seeking employment.

It is very much the case that in spite of the very many, far too many, millions spent to achieve an education system which should give an employment passport to all those who want to work, in reality the result is shoddy and face reddening.

How else can one explain that 41 per cent of our youth aged 18 to 24 are classified as early school leavers, meaning that they are not receiving any education or training, ending their schooling with at most a lower secondary level of education? We rank on top in this shame statistic followed by Portugal at 39 per cent. Countries like Poland, who have a lower employment participation rate, are on the other hand leading in the education of their youth with only 5.5 per cent of their youth not receiving some sort of tertiary education. In Switzerland, where very few students actually go to university only 7.8 per cent of the youth are not receiving tertiary education as most youths attend vocational schools even while they are working.

Can the country afford to continue offering elitist full-time tertiary education to the few and denying part-time vocational training to the youths who cannot make it to university, but can very well do with vocational training even while they are working? Unfortunately, the recent moves in this direction by MCAST are too little too late. Furthermore, the culture we have built of being paid for pursuing full time tertiary education leaves full timers enough time to enjoy the good life whilst part time MCASTers have to toil it out in their little spare time. We have built a strong culture against part-time vocational training when in reality we should have made such training as the core of our education system.

No single budget can work out miracles to correct wrong policies pursued over a long number of years. The government is making the mistake of thinking that control of the public deficit and entry into the Euro would on their own generate economic growth which sets the right background for reaching the Lisbon agenda targets including the increase in female participation rate in the employment market.

Unfortunately, nothing of the sort will happen. Results can only be delivered through a long-term programme which revises our educational focus from full-time tertiary education to part-time vocational training and through building a social environment which makes it possible for our females to pursue their career irrespective of their status, by creation of child care centres and the promotion of flexible working hours.

Until we do that, we are likely to be stuck in the mud, happy with mediocre economic growth rate and nursing structural macro-economic imbalances which act as a drag to higher growth in balanced sustainable manner spread across all economic sectors, rather than imbalanced growth focused on financial intermediation and the construction industry – which cannot keep the championship of growth without causing undue stress on other economic sectors. “Stuck in the mud” we will remain until we adopt sensible and productive education policies.

When and if I will ever see the Tal-Qroqq car park over-crowded at seven in the evening and quite vacant at 12 noon, then I will be able to say we are starting to get there.

Alfred Mifsud