The TCN debate ignores what drives demand for foreign labour
The debate over third-country nationals has focused too heavily on who is entering Malta and too little on the economic activities creating demand for their labour. If Malta wants a more sustainable economy, it must look beyond work permits and examine the businesses, incentives and standards shaping its growth.
Malta’s dependence on foreign labour has become one of the most contentious issues in the national economic debate. Much of the criticism has focused on the rapid increase in third-country nationals (TCNs), with some going as far as attributing the country’s economic model to the decisions of former Jobsplus chief executive Clyde Caruana.
Employed third-country nationals rose almost elevenfold in ten years
Foreign nationals in employment in Malta and Gozo, end of December each year
Hover or drag across the chart to read each year
But this explanation, however politically appealing, risks confusing the consequences of Malta’s economic model with the decisions that created it.
Foreign workers did not arrive in Malta and subsequently invent the jobs they occupy. In most cases, they came because businesses operating in Malta needed employees and were prepared to recruit them from abroad. The demand for labour was generated by economic activity, not by the workers themselves.
This distinction is important because it changes the question we should be asking. Rather than concentrating exclusively on how many foreign workers Malta permits to enter, we should examine what kinds of businesses are expanding, what jobs they are creating and whether that economic activity is making the country more productive.
The real issue is not simply how many people Malta’s economy needs. It is why the economy needs them, and whether that demand is generating sufficient value to justify the pressure it places on the country’s limited resources.
Foreign labour is a response to demand, not its original cause
There is a widespread misconception about how Malta’s foreign labour system operates.
Jobsplus does not independently recruit thousands of workers from outside the European Union and assign them jobs in the Maltese economy. Under the standard single-permit system, an employer must have a genuine job offer and submit an application on behalf of the prospective worker.
Identità is responsible for issuing single permits, while Jobsplus assesses applications from a labour market perspective. The system includes checks designed to determine whether an employer can meet its recruitment needs from the existing labour market.
The requirements have also become stricter. Since October 2025, employers recruiting new TCNs for most standard positions have been required to advertise vacancies through Jobsplus and the European employment network, EURES, before submitting applications. Certain categories of employment are exempt.
This does not mean the system has always operated perfectly. Nor does it absolve the government of responsibility for how foreign labour recruitment has developed.
The state determines the rules, sets the conditions for entry and decides how rigorously those conditions are enforced. Government policy can make labour recruitment easier or more difficult, and those decisions inevitably influence how businesses operate.
Nevertheless, there is an important distinction between facilitating recruitment and creating the underlying demand for workers.
Consider a restaurant that wants to extend its opening hours, a construction company taking on another development, or a retailer opening an additional outlet. It is the employer who first decides to expand the business and recruit additional staff. The permit system then determines whether the employer may recruit those workers from outside the EU.
Blaming the institution processing the employment application, without questioning the economic activity behind it, leaves much of the problem unexplained.
And that is precisely where Malta’s economic debate needs to move.
Not all economic growth delivers the same value
Economic growth is generally desirable. It creates employment, generates tax revenue and supports higher incomes. But not all growth contributes equally to a country’s long-term prosperity.
An economy can expand by producing more with its existing workforce, or by employing additional people to produce more goods and services.
Both contribute to GDP. Yet the distinction becomes particularly important in a country such as Malta, where land, roads, housing and public infrastructure are limited.
Malta's economy grew mainly by adding workers
Index, 2015 = 100. Real GDP, persons in employment, and real output per person employed
Switch between Malta and the EU, and hover or drag to read each year
Imagine two businesses.
The first invests in technology, improves its processes and manages to increase output without significantly expanding its workforce. The second expands by opening several additional outlets, each requiring more employees, more deliveries, more premises and more resources.
Both businesses may contribute to economic growth. However, the second relies more heavily on additional labour and physical space to generate that growth.
This does not automatically make it economically undesirable. Labour-intensive businesses provide essential services, create opportunities and contribute to competition. But where expansion generates relatively little additional value per worker, the pressure on infrastructure and public services can become increasingly difficult to justify.
The distinction matters because Malta cannot continue expanding its population, commercial space and infrastructure indefinitely without considering the economic returns.
The objective should therefore not be to eliminate labour-intensive activity. It should be to encourage businesses to generate greater value from the labour and resources they use.
This is where the debate about TCNs becomes part of a much wider discussion about productivity, investment and the quality of Malta’s economic development.
The problem with an economy built around low-value expansion
Consider the increasing presence of small catering establishments, convenience stores, takeaway outlets and similar businesses across Malta.
These enterprises are not inherently problematic. Some provide useful services, introduce new cuisines, serve neighbourhoods that lack certain facilities and offer genuine entrepreneurial opportunities.
Indeed, competition from new entrants can benefit consumers through lower prices, more choice and better service.
But there is a legitimate question about whether the continued multiplication of similar businesses, particularly in areas where such outlets are already concentrated, represents the best use of Malta’s limited resources.
A business can survive through long opening hours, a large supply of relatively inexpensive labour and very small margins. Such a model may be commercially viable for its owner without necessarily generating substantial value per worker or making an equally substantial contribution to the wider economy.
Half of employed third-country nationals work in elementary or service and sales jobs
Share of employed third-country nationals, end of December 2025
When several similar establishments compete in the same locality, the outcome may be lower prices and greater convenience. Equally, it may mean more pressure on commercial rents, waste collection, deliveries, parking and surrounding residential communities.
Whether the benefits outweigh the costs depends on the particular business and its location. It cannot be determined simply by counting the number of shops or looking at their ownership.
Yet this is precisely the kind of assessment that should feature more prominently in Malta’s economic planning.
The issue is not whether a business is owned by a Maltese national, another EU citizen or a third-country national. A poorly managed, low-productivity business does not become more economically valuable because its owner is Maltese. Equally, a foreign-owned enterprise should not be treated as undesirable simply because of its owner’s nationality.
The relevant distinction is between businesses that create sustainable economic value and those whose operations generate disproportionate costs for the wider community.
Malta should be concerned about the latter, irrespective of who owns them.
Private profitability is not always the same as national benefit
The fact that a business is profitable does not necessarily mean that its expansion is in the wider public interest.
This is a basic economic distinction that is frequently overlooked.
A business owner makes investment decisions primarily by comparing expected revenues with the costs the enterprise must bear. But some costs associated with economic activity are shared with society rather than paid directly by the business.
A new outlet may be commercially profitable while contributing to congestion through additional deliveries, placing pressure on public waste collection or increasing noise in an already crowded residential area.
An employer recruiting additional workers may create economic value while also contributing to demand for housing, transport and public services.
These wider consequences are known as externalities. They arise when the full costs or benefits of an activity are not reflected in the prices paid by those undertaking it.
They do not mean that businesses should be prevented from expanding. Rather, they justify asking whether existing rules adequately account for the wider impact of commercial activity.
This is particularly relevant to Malta.
In a larger country, economic activity can often be distributed across different regions. Malta has considerably less room for such adjustment. Commercial development, residential housing, tourism and transport compete for the same limited physical space.
The result is that relatively small individual decisions, when repeated thousands of times, can produce substantial collective pressures.
One more outlet may not make much difference to a locality. Fifty additional outlets, together with the workers, deliveries and commercial activity they generate, can change its character considerably.
This raises a fundamental policy question: are Malta’s licensing and planning systems sufficiently equipped to assess the cumulative impact of economic activity, rather than treating each proposed business largely as an individual application?
Business licensing should become part of economic strategy
Malta has spent considerable political and administrative effort debating who should be allowed to work in the country. Far less attention has been devoted to whether the businesses generating that employment are consistent with its long-term development objectives.
This is a missed opportunity.
Commercial licensing, planning permission and labour market policy should not operate as entirely separate considerations.
A business may satisfy the legal requirements for opening an establishment while its location contributes to an already excessive concentration of similar commercial activity. Another may meet employment rules while depending on labour practices that deserve closer regulatory scrutiny.
The solution is not to allow government officials to decide arbitrarily which businesses the market needs. That would risk protecting established operators from competition, creating unnecessary bureaucracy and discouraging entrepreneurship.
Markets are generally better than government at discovering consumer preferences. The presence of several competing businesses is not, by itself, evidence of economic failure.
However, government has a legitimate responsibility to manage the consequences that individual market decisions impose on the wider community.
In areas experiencing particularly intense commercial activity, licensing and planning decisions could take greater account of local infrastructure, waste management, traffic, noise and the cumulative concentration of certain uses.
Such assessments should be transparent, proportionate and applied equally to businesses regardless of ownership or nationality.
The objective should not be to protect existing shops from new competitors. It should be to ensure that commercial growth remains compatible with the physical and social capacity of the locality.
At the same time, broader economic policy should encourage investment in productivity, technology, workforce development and higher-value activities.
Malta cannot expect to develop a more productive economy simply by restricting the number of foreign workers. It must also create conditions that make productivity-enhancing investment more attractive than expansion based primarily on additional labour.
Protecting workers is part of improving the economic model
There is another dimension to the debate that deserves greater attention: the quality and safety of the jobs being created.
Foreign workers are particularly exposed to vulnerabilities when their employment and residence arrangements are closely connected to a particular employer.
That does not mean all TCNs experience poor working conditions. Many are employed in skilled professions, enjoy good salaries and contribute substantially to Malta’s economy.
But workers in labour-intensive sectors, particularly those earning lower wages, may face greater practical difficulties in challenging employers over unpaid overtime, unsafe conditions or contractual disputes.
The consequences extend beyond the individual worker.
When an employer reduces costs by ignoring labour standards, it gains an unfair competitive advantage over businesses that comply with the law. Poor enforcement can therefore penalise responsible employers while rewarding those prepared to cut corners.
This makes workplace inspections, wage enforcement and occupational health and safety essential components of economic policy.
The principle should be straightforward: businesses must compete through efficiency, quality and innovation, not through the exploitation of workers or disregard for legal obligations.
Stronger enforcement would protect Maltese, EU and third-country workers alike. It would also help prevent responsible enterprises from being undercut by competitors operating below acceptable standards.
A more productive economy and a fairer labour market are not competing objectives. Properly designed policies can support both.
Malta needs a better question
The debate over foreign workers too often presents Malta with a false choice.
On one side is the argument that continued economic growth requires an ever-expanding workforce. On the other is the belief that restricting foreign labour will, almost automatically, create a more sustainable economic model.
Neither position is sufficient.
Foreign labour has contributed to Malta’s economic expansion and continues to meet genuine needs in important sectors. Abrupt restrictions, without corresponding improvements in productivity or changes in labour supply, could create shortages, increase costs and undermine services on which residents depend.
But it would be equally mistaken to assume that every additional job, business or worker represents an equal contribution to national prosperity.
The challenge is to distinguish between economic activity that strengthens Malta’s productive capacity and activity whose benefits are limited relative to the resources it consumes.
That requires more than a discussion about migration quotas or the administrative procedures governing employment permits.
It requires greater coordination between economic policy, business regulation, urban planning and labour market enforcement. It requires stronger incentives for businesses to invest in productivity rather than relying indefinitely on workforce expansion. And it requires an honest assessment of the pressure that different forms of economic activity place on the country’s infrastructure and communities.
Most importantly, it requires us to stop treating foreign workers as the cause of decisions made by businesses and policymakers.
The purpose of economic policy is not simply to maximise the number of businesses, jobs or residents. It is to improve the prosperity and quality of life of the people living in Malta.
The question, therefore, should not be how many more workers Malta can accommodate. It should be what kind of economy Malta wants to accommodate, and how much value that economy creates for the resources it consumes.
That is where a serious debate about the country’s economic future should begin.