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Conference on Labour MobilityConference on Labour MobilityConference on Labour MobilityConference on Labour Mobility

Organised by SIMA as part of the SEEDS 2 Project which is supported by the European Organised by SIMA as part of the SEEDS 2 Project which is supported by the European Organised by SIMA as part of the SEEDS 2 Project which is supported by the European Organised by SIMA as part of the SEEDS 2 Project which is supported by the European

CommissionCommissionCommissionCommission

Lisbon Lisbon Lisbon Lisbon 1111stststst, 2, 2, 2, 2ndndndnd,,,, 3333rdrdrdrd March 2007 March 2007 March 2007 March 2007

Presentation by Mr. Joseph Farrugia,Presentation by Mr. Joseph Farrugia,Presentation by Mr. Joseph Farrugia,Presentation by Mr. Joseph Farrugia,

Director General, Malta Employers’ AssociDirector General, Malta Employers’ AssociDirector General, Malta Employers’ AssociDirector General, Malta Employers’ Associaaaationtiontiontion

The following paper was presented by Mr. Joseph Farrugia, Director General of the Malta

Employers’ Association during a conference on flexicurity and labour mobility organized by

SIMA in Lisbon on the 1st, 2nd and 3rd March 2007. SIMA is a Portuguese trade union

representing workers in metal industries. The conference was also addressed by prominent

trade union leaders in Europe and employer representatives from a number of multinational

companies, among them Siemens and Delphi. Mr. Farrugia was invited to deliver a

presentation on labour mobility.

It has become an economic fact of life in all countries that globalization is leading to greater

mobility of resources. Improvements in communication and channels of distribution, and

changes in the political systems in many developing economies have made them

increasingly attractive destinations of foreign direct investment for various reasons, among

them cheaper costs of production, and proximity to major markets.

In many circumstances, the reverse side of foreign direct investment in one country is an

outflow of investment from

another, and many economies

are struggling with the

issue of relocation that has

led to the decline of many

industries that have moved to

cheaper production

locations. This has mostly

been the case in areas of

labour intensive, low value

added production. The

elimination of barriers to

mobility of capital has also had

significant repercussions on the demand for labour in many countries, where relocation has

resulted in structural unemployment, with many workers having to come to terms with the

fact that jobs are simply not as stable as they used to be.

We often restrict the term mobility to labour mobility. However, the term applies equally to

the other side of the labour market equation. Even employers are mobile, particularly those

that operate on an international scale. Actually, mobility of labour is frequently the cause of

employer mobility for such reasons of relocation and outsourcing, which in themselves are

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the result of competitive forces. For many companies, relocation is simply a do or die

decision in a constant struggle to keep ahead of the competition and to meet the needs of

ever-demanding customers.

In the same way that business is continuously adapting itself to meet market challenges,

labour as an input also needs to be more flexible and mobile. The situation with labour,

however, is that one cannot approach the matter of mobility from a purely financial

perspective, as the human and social aspects of the phenomenon cannot be ignored. The

universal premise of labour law is that labour cannot be treated as a commodity. Long-term

unemployment resulting from the obsolescence of skills, the older segment of the

unemployed who may be less employable, and other sensitive segments raise arguments

about the need for strategies that reconcile the purely economic aspects with the social

dimension of mobility.

Factor mobility is a force, and the main challenge in dealing with forces is how to harness

them to work in one’s favour. There are definitely positive and negative aspects to labour

mobility as there are to investment mobility. For example, investment mobility has resulted

in cheaper products from third world countries. However, for a force to work in one’s favour,

it cannot be allowed to have a free rein. It has to be managed well, and a basic task that faces all social partners, and that should be part of the social dialogue agenda is to design

strategies that turn mobility into a positive force for employers, for employees and for the

national economic and social well being.

This is, in a sense, what the Lisbon Agenda has set out to do. One of the fundamental

principles behind the concept of an internal market is the free movement of goods services

and also factor mobility to harmonise the standard of living between different members

states and also to increase the overall productivity and competitiveness of the European

Union in general. There is a deeply rooted belief that mobility of resources will lead to an

improvement in living standards and productivity, and hence why such mobility is to be

encouraged. This belief is also shared by many European citizens as revealed in the 2005

Eurobarometer survey on geographical and labour mobility. The findings showed that the

majority of respondents placed ‘freedom to travel and work in the EU’ as the main factor of

what EU membership meant to them, and ranked it above other aspects of EU membership

such as peace and the single currency.

There is no question that for the ambitions of the Lisbon targets to be realized, there has to

be a labour force that is sufficiently skilled and adaptable to meet the challenges of global

competition. The EU Commissioner for Employment, Social Affairs and Equal Opportunities,

Vladimir Spidla stated last year that: ‘If we want to see the number of workers in the right

jobs envisaged by the EU growth and jobs strategy, we really need a more mobile work

force’. For a country like Malta, this is perhaps even more essential since economic growth

can only be realized by maximizing the potential of the human resource, since it is practically

the only resource available. It is a known fact that the Lisbon targets are far from being

achieved, as the overall European Labour market still suffers from a general lack of skills

and mobility that is further compounded by an ageing labour force in most EU countries.

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Research conducted by Price Waterhouse Coopers among employers during 2006, which

was designated as the European Year of Workers’ Mobility’ reveals a certain hesitance by

employees and employers about the benefits of mobility when compared to similar research

conducted in 2001. In 2001, the main business driver by employers was considered to be

availability of staff. In 2006 this was surpassed by changing customer needs, competitor

activity and staff costs. Likewise, the situation has changed with respect to employees’

perceptions, as economic considerations also became the main reason for mobility. The

experience between 2001 and 2006 also demonstrates that levels of mobility have

remained low in the EU.

According to the Price Waterhouse Coopers report, although employers are convinced that

there will be an increased demand for mobility in the future, individuals are concerned about

the negative consequences of mobility on the labour market and on family life.

In order to analyse in better detail the implications of mobility and to propose strategies that

will turn labour mobility into a positive force for social and economic change, this

presentation will look first at the role of education in facilitating labour mobility, and then to

discuss the different aspects of geographical and occupational mobility.

Role of EducationRole of EducationRole of EducationRole of Education

Definitely any discussion on the merits and demerits on mobility will analyse the extent to

which occupational and geographical mobility is the result of voluntary choices or else is a

matter of forced circumstances. A better standard of education is a key ingredient in

enhancing voluntary mobility, provided that educational and training systems are in tune

with the demands of the labour market. Therefore a stronger dialogue is required between

employers and educational institutions to channel students to pursue areas of studies that

are in demand. In Malta there is a strong incentive to follow studies at tertiary level since all

students receive a monthly stipend, and all courses are free of charge. Recently the stipend

system has been reformed to discriminate in favour of courses that are in higher demand,

such as engineering, information technology and scientific subjects. Students following such

disciplines are therefore entitled to a higher stipend than others. In spite of the stipends

system, however, there is still a worrying number of students who opt not to pursue tertiary

level education, and lack any formal qualifications. The job opportunities for such persons

are on the decline, and an increasing number of them end up as long term unemployed.

The issue of education is also important at trans-national level. Making educational

qualifications transferable between countries contributes to geographical mobility, and there

is the need for better coordination between educational authorities at European level for

better recognition of educational qualifications.

The labour force needs to embrace a culture of life long learning to facilitate flexibility and

mobility. Life long learning is conducive to better employability and employees need to keep

their skills updated, and where necessary, learn new ones. In Malta we have seen a rapid

decline in manufacturing of textile and footwear companies in recent years, and thousands

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of people have been laid off in these sectors. Many of them have been re-trained and are

today working in jobs that are unrelated to the ones in which they were occupied previously,

such as call centres, pharmaceutical companies and tourism. Employers have contributed to

this development. For example, the Ministry for Information Technology and Investment has

introduced a scheme – MYWEB – that offers training in basic IT skills at the workplace to

employees that are particularly at risk of losing their job. Unions have also been proactive in

Malta as they offer numerous courses to their members. Another positive training

experience in Malta has been the Training and Experience and Exposure Scheme (TEES)

that has organised training and job placements to that segment of the unemployed that is

over forty years of age by offering a period of six months training at a full wage to the

unemployed followed by a job placement. This was an ESF funded project that has been

successful in providing employment opportunities to a number of long term unemployed,

many of them in areas of economic activity unrelated to the ones in which they were

employed previously. Life long learning is also important for female returners. Malta suffers

from a low female participation rate, and many women who have been inactive in the labour

force for a number of years may require training to find fresh employment.

Employers also offer on the job training in many companies. Training is seen by employers to

be an important motivator and offers options for internal mobility. Examples of employees

holding high positions in a company as they moved up the ranks of the organisation are very

common in Malta. Employers would be concerned about the threat of investing in training

and losing the trained labour to other companies. This happens particularly in situations of

labour shortages in particular skills, such as IT. As Malta is attracting considerable

investment in the IT sector, labour shortages are leading to mobility of labour and this is

causing wage inflation in some sectors of the labour force. This is leading the inclusion of

clauses in contracts of employment that allow for re-imbursement clauses in cases where

employees leave a job before a specified time period after having received voluntary training

by the company.

As explained, education is essential to promote both geographical and job mobility. It also

needs to be supported other policies to reach specific human resources objectives. Lack of

wage differentiation, high taxation and other disincentives can lead to brain drain in critical

areas. For example, Malta suffers from a chronic brain drain in the medical sector, as

Maltese doctors are highly qualified, multilingual and are offered superior conditions of

employment outside the country. Countries like Lithuania have also suffered from a

significant brain drain. The depletion of national human resources through geographical

mobility can be a barrier to the country’s development, and can increase the economic

disparities between EU states. This is another instance where labour mobility has to be

managed to complement national strategies.

Geographical Geographical Geographical Geographical mobilitymobilitymobilitymobility

One aspect of geographical mobility that is shaping the structure of the labour force is

immigration. In the past, Malta has experienced extensive emigration to countries such as

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the United States, Canada and Australia resulting from job scarcity. The current situation is

one whereby there are more returning migrants than emigrants. Malta also has attracted

considerable foreign workers from various EU countries to fill numerous vacancies in areas

in which there are labour shortages. Figures by the Employment and Training Corporation

show that more than 5% of the current labour force is foreign. The actual figure may be

much higher than the official statistic since many foreigners may be employed in the black

economy. Since joining the European Union, Malta’s experience thus far is that the influx of

labour from other EU countries has not been dramatic, as some had feared. Many EU

workers who are working in Malta are not competing with the Maltese for jobs. Rather, they

are filling vacancies that Maltese workers did not apply for. From this angle, labour mobility

has had positive economic effects for Malta.

At the same time, there is an increasing incidence of Maltese employees seeking work

opportunities in the EU. The figures for Malta as reported in the study Mobility in Europe by

the European Foundation for the Improvement in Living and Working Conditions show that

5.5% of Maltese expect to move to another EU country in the next five years, compared to

1.8% in Portugal and Italy. The figure for Malta is lower than that of other New Member

States such as Poland,

Lithuania, Latvia and

Estonia. This indicates

that in spite of the

current low level of

mobility, the Maltese

labour force is expected

to integrate more with

the EU labour force in

the coming years.

Young people in

particular are more

likely to seek to enrich

their working

experience by working in

another EU country. This can have a positive effect on the economy since they can bring

back with them enhanced skills and knowledge, assuming they return. 38% of those who

expressed the intention to move to another EU country in the coming five years are between

18 and 24 years of age.

Because of its geographical location between two continents, Malta is also experiencing an

influx of non-EU nationals, mostly from African countries. The main concern of the

authorities on this issue is that the influx of asylum seekers and economic migrants is

unpredictable and could depend on such uncontrollable variables such as the weather.

These immigrants end up in Malta only because of its geographical proximity to the African

continent, and frequently mistake the Maltese shore for that of Italy. Their clear intention is

to move to other EU countries, which is why Malta has been lobbying for a common front in

dealing with this phenomenon. Nonetheless, there are cases where a number of them have

productive and stable jobs, and are in fact integrating with the Maltese community.

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These developments point towards a more international character of the Maltese labour

force in the coming years. Yet, the conclusions of the study by the European Foundation,

based on their analysis of both geographical and job mobility, places Malta with the cluster

of countries (along with Portugal, Greece, Italy, Slovakia Poland, Slovenia and Austria) with

the least mobility.

There are other factors that influence geographical mobility. The portability of pension and

social security rights can be an inhibiting factor to trans-national mobility. This could be a

major reason why the percentage of Europeans not living in their country of origin still stands

at just 1.5%. Other barriers are languages, job opportunities for spouses, social networks

and different work cultures. It is the fact that countries are so diversified that act as a barrier

to geographical mobility. The United States, which scores much higher on labour mobility

criteria is much more homogenous than Europe. The setting up of the EURES online job

portal is definitely a step forward in encouraging mobility. Many Maltese have successfully

accessed jobs in the EU through the EURES initiative. The Europass will also be instrumental

in improving the recognition of qualifications across the EU and thus be of use to both

employers and employees to be able to judge more objectively the suitability of jobs or

applicants. The Europass diploma supplement makes it easier to establish equivalence of

qualifications and thus enable students to further their studies in other EU countries.

The Commission has also raised the matter of trans-national mobility in its recent Green

paper: Modernising Labour Law to meet the Challenges of the 21st Century. One of the

questions that has been fielded by the Commission for discussion between the social

partners relates to the employment rights of workers operating in a trans-national context,

including in particular frontier workers. The Commission also asks whether a more

convergent definition of the term ‘worker’ is required to ensure that they can exercise their

rights irrespective of the member state in which they work. The question clearly seeks to

address the aspects of labour legislation, both at national and EU level that need

clarification or amending to facilitate cross border mobility between member states.

Another aspect of trans-national mobility that is being tackled by the Commission is that of

posted workers, which refers to persons who carry out their work in another EU country for a

limited period. The evidence seems to point towards an increasing number of such workers,

and a main reason for this is to work round the restrictions on labour mobility applied by

some of the ‘old member states’ to restrict a sudden influx of workers from the new states.

This shows that attempts to control market forces, including those of the labour market are

hardly effective. The Posted Workers Directive protects employees from exploitation through

inferior working conditions arising from the posting in another country.

The above-mentioned points stress the importance of dissemination of information to

employees to make them aware of their rights when they seek employment in other

countries. The availability of such information can in itself be a factor that influences the

decision to take up employment in other EU states.

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Occupational MobilitOccupational MobilitOccupational MobilitOccupational Mobilityyyy

Labour mobility can be compared to the oil that lubricates the labour market, and thus

employers believe that, while regulation is important to safeguard employees from abusive

practices and to establish a floor of rights, over-regulation might hamper job creation, and

act as an incentive to the black economy and atypical employment. An over-regulated labour

market can be a barrier to mobility from atypical to full time employment. One of the

concerns of the Commission, which is clearly expressed in the Green Paper on Labour Law is

the increase of the percentage of employees in atypical employment, and the emergence of

new forms of working arrangements, such as three way relationships and dependent self

employment. The figures across the EU reveal that 18% of the labour force is employed on a

part time basis and an additional 14% is on a fixed term contract of employment. There is

also an increasing number of employees working with temping agencies, others on zero hour

contracts that are fast becoming an established feature of European Labour markets. In

Malta, only 10.5% of the labour force and 5% of males, are employed on a part time basis.

The figure for fixed term employment is also low, standing at 4.3% of the labour force.

It is generally accepted that this variety of contractual forms contributes to the

implementation of the concept of flexicurity, but the downside is that they have a negative

effect on income security, and also on the stability of working and living conditions. Three

questions emerge:

1. Have these types of work contracts been instrumental in attracting a higher labour participation rate because of flexible work arrangements?

2. Are there sufficient opportunities for mobility between one type of employment to another, especially from atypical employment to full time employment?

3. Have these working arrangements arisen in response to the need for a more flexible labour market, or else because over regulation has constrained employers to resort to

these types of contracts to minimise labour costs in order to remain competitive?

In Malta, a core subject of debate is the low participation female rate in the labour force,

which is the lowest in the EU. Is this partly attributable to fewer options to work part time or

on reduced hours, or is this the result of other socio cultural factors? Would the introduction

of more family friendly measures automatically translate into mobility into the labour market

among the female segment? With respect to mobility from atypical to full time employment,

the Employment in Europe Report has found that within the EU, more than 60% of those

employed on an atypical basis in 1998 found full time employment within five years.

Therefore atypical work has been a stepping-stone to stable employment to many

employees, particularly young workers.

The answer to the third question above is probably that the labour market has responded to

the need for more flexible work arrangements - both from the part of employers and

employees - but labour market rigidities, and the costs of employing persons on full time

employment has also shifted employers’ preference towards atypical employment contracts.

My hypotheses is that increasing regulation at EU level without respecting the different

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characteristics of the individual labour markets will result in an increasing percentage of

persons who will find it more difficult to move from atypical employment to full time

employment, many of whom will prefer to have stable employment. In other words, the two-

tier labour market referred to in the Kok report will become more pronounced.

Another aspect of labour mobility is mobility within the same company. There are clear

advantages to both employer and employee in planning career paths to employees. Long

standing employees can be more loyal, and may require less training to assume higher

positions within an organisation since they are already familiar with the company culture,

which in itself is conducive to stronger team building. Internal promotions are also a strong

motivator and serve to reduce unwanted labour turnover.

Employees need to be encouraged to embrace a culture of employment security, rather than

job security, and to adopt an entrepreneurial attitude towards their career. As explained

earlier, life long education has become a necessity, and the ultimate responsibility to make

oneself employable does not lie with the state, nor with the employer, but with the

individual. The role of the state is of course to facilitate economic growth and job

opportunities through a sense of national vision and well-designed economic strategies, as

well as to offer the necessary infrastructure to enable employees to manage their careers.

Employers should integrate human resources development with the overall business

strategies. Internal job mobility is an asset to companies as it enhances flexibility and pro-

activity to changing competitive climates. In the manufacturing sector, many Maltese

companies are surviving in an increasingly aggressive global competitive environment

through multi-skilling which makes such companies in a better position to meet the

demands of niche markets and short lead times. These companies can thus be in a position,

because of their high level of flexibility and immediate response times to compete with other

companies that have the advantage of larger scale and lower labour costs. Niche markets

also frequently demand specialised products and thus are less prone to price competition.

This scenario stresses the role of trade unions to embrace flexibility clauses in collective

agreements, which is generally the case in the Maltese experience. Within the EU, 24% of

employees have never changed employer. Malta has the highest percentage of employees

that have never changed employer – 42%, and the average number of years an employee

stays in a job is 10 years compared to 5 years in Denmark.

As with other forms of mobility, external job mobility can be of a voluntary or a forced nature.

Buoyant economic conditions act to stimulate competition among employers and encourage

inter-company mobility. This is a feature in expanding sectors of the economy especially if

the increased demand for labour is not matched by a corresponding supply. External

mobility can also be of a forced nature through closures. This can also result in an

imbalance in the labour market that leads to deterioration in average earnings, and possibly

a move towards atypical employment for redundant employees. As economies face

restructuring, employees need to have sufficient resources, and an attitude to switch not

just jobs, but also occupation. Occupational mobility is a means of minimising the negative

effects of layoffs from declining economic sectors, and directing surplus labour into

expanding ones. Employees must be covered by the necessary mechanisms to be

forewarned of possible redundancy through information and consultation rights provisions,

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and governments can offer training schemes and other active market policies to retrain of

employees to move to areas that offer better chances of employment.

Unemployment benefits and other means of social assistance should also be managed to

ensure that they do not incentivise people to stay out of employment. In Malta this is an

issue since unemployment benefits approximate the national minimum wage. Rather,

beneficiaries of such entitlements should be subjected to compulsory training and job

placements to become more employable and thus to be occupationally mobile.

Conclusion Conclusion Conclusion Conclusion

Clearly labour mobility is a complex issue. On the one hand it is a necessary characteristic of

the labour market, since the economy cannot evolve without having a mobile labour force.

On the other mobility can occur in various forms and for many reasons that are not always

conducive to economic prosperity or social improvement. Therefore one cannot generalise

about the subject. Each country has its own characteristics that may also differ between

regions and economic sectors. The basic task that faces the social partners is how to

anticipate changes in the demand for labour to augment the mobility of the labour force and

to minimise economic and social friction that can result from the forces that necessitate

labour mobility, thus turning it into a. positive force. The on Labour mobility by the European

Foundation for the Improvement in Living and Working Conditions states that: ‘It would …appear that what is good for the EU as a whole – greater overall levels of mobility – is not necessarily reflected in how individual feel about mobility in their own lives’. This shows that, at EU level, more consideration must be given to the concerns at national and also at

individual level to the consequences of mobility. The overall vision of the Lisbon agenda

must reflect the reality of the EU citizens.