Sustainable pensions

The Labour Government’s consistency in increasing labour market participation and increasing pensions for those most in need has proved to be sustainable and adequate.

The May 2018 Country report stated that “the long-term sustainability of the pension system has improved. Mainly thanks to a more positive assessment of Malta’s long-term growth potential, the long-term sustainability prospects for pension expenditure have improved.”

Eurostat’s material deprivation rate expresses the inability to afford some items considered by most people to be desirable or even necessary to lead an adequate life as, for example, affording to keep the house warm, pay rent or mortgage or utility bills and having a TV. Eurostat figures in table above clearly indicate that Malta’s material deprivation for persons aged over 65 has decreased from 16.9 per cent in 2013 to 6.9 per cent in 2017. It is also well below the EU average rate of 13.1 per cent, Euro area average of 10.9 per cent and figures in other Mediterranean countries namely Spain 8.7 per cent, Italy 16.8 per cent and Greece 32.3 per cent.

Pension sustainability is all about striking the right balance between pensioners and the labour force which contribute towards their pensions. Back in 2013, Malta had one of the lowest female labour-market participation. Encouraging more females to enter the labour-market was the first successful step towards an increase in labour-market participation. Figures for Malta’s female participation indicated an increase from 48.8 per cent in 2013 to 57.6 per cent in 2017.

Undoubtedly, female participation is still way below the EU average of 62.5 per cent . However, the gap is closing from 10 percentage points in 2013 to five percentage points in 2017. EU average female participation should be achievable as more females can envisage employability throughout their working life.

Providing free childcare services as well as the removal of private sector maternity leave finances increased female participation drastically. Automatically, the private sector financing of maternity leave undeservedly discriminated female employees in the same private sector since employers opted for male employees to avoid added payments.

These measures are expected to continue bearing fruits, even exponentially, as more females are encouraged to invest in their careers and seeking a longer working life , contrary to what was prevailed just a couple of years ago.

In the meantime, the government is also allowing foreign workers to supplement the local workforce in order to fulfill labour market gaps. This is again providing a greater sustainability for pensioners until greater female participation trickles through the labour market in the long-term.

This government has managed to grab the bull by its horns and implement policies which had been too long left on the back burner to the detriment of the local labour supply. Today, we can gladly look forward to more workers sustaining pensions.