Tuesday, 11 March 2014

A year later: the true picture of unemployment

This article was published in The Malta Independent on Sunday - 09 March 2014

I am fed up with endless arguments between Government and Opposition where the former emphasises that the employment situation is getting better whereas the latter stresses that the unemployment situation is getting worse.

In theory, because of the old adage of lies, damn lies and statistics, both arguments could be correct.   If the labour supply increases faster than employment, government could boast of increased employment and the opposition could point out increased unemployment.

To avoid this statistical conundrum one has to avoid going by registered employed or unemployed and read the situation through the Labour Force Survey (LFS) which rides over the erratic registration issues and looks at employment and unemployment in toto, irrespective of whether registered or not.

To give an idea about the difference in results produced by different methodologies just see these figures both related to September 2013, the date of the latest published LFS:

                                                            LFS Q3/2103                        Registration Statistics                                                                                                                                        September 2013

Employed                                        179476                                          157684
Unemployed                                      12827                                              7619

Labour Supply                                 192303                                          165303

What this basically means is that over and above registered workers there additionally are some 21792 productively employed, but unregistered and therefore paying no payroll taxes or national insurance.    It means there are a net additonal  5208 unemployed persons  who wish to work but are not registering with the ETC.   It also means that our labour supply is 27000 (16%) greater than official registered records indicate it is.

So politicians of left or right should stop singing from the hymn book that suits them, which gives a very incomplete picture of the employment situation, and instead interpret employment data from the LFS which is more complete and consistent.

The last LFS is for Q3/2013 and in comparison to Q3/2012 the situation is :

                                                                     LFS Q3/2103            LFS Q3/2012

Employed                                                          179476                    174126
Unemployed                                                        12827                      12283

Labour Supply                                                   192303                   186409

This shows that unemployment has held steady in absolute terms even though the Labour Force increased by 5894.   In percentage terms the unemployment as a percentage of the labour force kept steady from 6.59% to 6.67%.

In September 2013 the present government had been in office for just 6 months.   It is doubtful whether in the first 6 months any government can do anything material that translates into noticeable differences in the rates of employment / unemployment, although the very removal of uncertainty of  elections help to stimulate job producing investments.  In fact jobs increased in the 12 months to September 2013 by 5350 compared to 3660 in the previous 12 months to September 2012.

It is too early for the government to take credit for job creation as well as for the opposition to pin fault on government for what they perceive as rising registered unemployment.   Generally such increase in registered unemployment in the context of increasing employment is a sign of people who had stopped registering coming back on the labour market as they perceive better employment prospects.

But for a real analysis of government labour policy effectiveness we have to await a few more LFS quarterlies.

A year ago to the day Labour won the general elections with an untypically wide margin that left no room for doubt that people wanted change.   Next Tuesday Dr Joseph Muscat will celebrate his ‘quccija’ as Prime Minister.    Many columnists today will do their analysis of Labour’s performance of its first year in office and may be one expects me to put in my two penny bit,  biased or objective as it may be perceived.  

I will try to keep it short.  If one prefers one-line assessments it can be condensed to “so far so good but could be better”.  

For a somewhat more detailed analysis the good is:
  • ·         Can do attitude

  • ·         Business-like approach, free of corruption and minimal bureaucracy

  • ·         Tackling old problems like Enemalta’s finances  , cost of utilities, public transport and restructuring of the judiciary systems and set-up.

  • ·         Disclosure of corrupt practices as in the Smart Meter scandal

  • ·         Allowing continuity where necessary as in the case of Air Malta’s restructuring and the tourism sector in general

  • ·         Delivering pro-growth and pro-employment budget while staying within Euro area deficit targets

  • ·         Energising foreign investment promotion through a re-born Malta Enterprise.

  • ·         New initiatives related to oil exploration

  • ·         Build-up of  regional support for effective lobbying in the EU council to revisit EU’s burden sharing arrangement related to illegal immigration

  • ·         Innovation to open up new economic areas such as the IIP and ensuing boost to infrastructure investment through sovereign wealth fund like mechanisms.

Could be better:

  • ·         No initiatives for higher tax compliance and enforcement of fiscal morality.

  • ·         Not enough consultations before important decisions are taken, projecting an image of dithering when decisions have to be revisited following subsequent consultations

  • ·         Not yet fully adjusted to government role and clinging to practice when in opposition to point out problems but offering little by way of effective solutions. 

      We are also marking the first anniversary of the PN’s role reversal to opposition after an overlong stay in government when they finished with an empty tank leading to their disastrous performance at last elections.

How did the PN fare?  The simplest answer is the same as the then MLP fared in the legislature between 1987 – 1992 after three consecutive terms in government.   Like the MLP then, the PN have not accepted their new reality and are continuing to assume that by depicting government in the most negative way and obstructing in the most confrontational manner possible, they can force the electorate to realise their misjudgement last year and restore their pretence for a God given right to be a permanent government.   Their interpretation of consensus is still what it was when in government: my way or the highway.

As is normal it takes a second electoral defeat before the PN will take steps to  re-make themselves electable.

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