The role of migration within the context of the Maltese labour market

Abstract

Throughout the years, the European Union has been facing a situation of an ageing population. As a result, a prominent subject of interest is whether replacement migration should be further encouraged. Inward/outward labour migration has an economic effect on EU economies, since it particularly directly affects labour markets. In such a context, the aim of this study was to try and assess how migration has affected Malta’s labour market, thus unemployment and the real wage level. The array of empirical literature does not agree on conclusive relationships between these variables, as the result depends upon the country being surveyed and the skill level of both migrants and natives. Nonetheless, the effect of migration on labour markets seems to be minimal.

The yearly data obtained with respect to migration for the period 1977-2013 showed that, with an exception in 1987, there was always positive net immigration in Malta. The Johansen procedure was utilised to ascertain that the variables are cointegrated; in fact, a cointegrating relationship was found. The long run cointegrating solution suggested that a significant negative relationship exists both between positive net immigration and the unemployment rate and also between net immigration and real wage levels. Even though the effects were small and statistically insignificant, the same negative relationships were observed over the short-run, following the construction of a vector error correction model. Following the results, a set of policy implications were outlined, primarily in respect of challenging negative traditional stereotype thinking; improving working conditions, equality and integration of immigrants in the labour market.