Malta’s Tapering of Benefits (TOB) scheme significantly enhances the chances of finding employment after a spell on benefits, according to a study conducted by a senior economist at the Central Bank of Malta, Kurt Sant.

Published in the International Social Security Review academic journal, the study finds that the TOB scheme has effectively doubled the likelihood of securing a job after receiving benefits.

The study looked at individuals receiving unemployment assistance (UA), social assistance (SA), and social assistance for single unmarried parents (SUP), with SUP recipients enjoying the largest gains, while SA recipients saw a still considerable improvement.

The Maltese TOB scheme is granted for three years (36 months), whereby in addition to the salary in their newly found job, individuals receive 65 per cent of their benefit in the first year, 45 per cent of their benefits in the second year, and 25 per cent of their benefit in the third year.

This contrasts with the situation prior to the TOB scheme, whereby those starting a new job lost all their benefits upon finding a job. As such, the TOB scheme works by increasing the opportunity cost of inactivity, making employment more enticing.

Speaking to BusinessNow.mt, Mr Sant notes that “active labour market policies have significant potential to overcome the poverty trap and reduce welfare dependency.”

Kurt Sant / LinkedIn

Passive labour market policies are concerned with providing replacement income during periods of joblessness or job search, while active policies refer to labour market integration through demand or supply-side measures.

While “active policies have the risk of being very costly, especially if designed badly,” Mr Abela continues, “studies show that when designed well, active policies perform much better than passive policies when it comes to eliminating the dependency problem.”

The research results show that SUP beneficiaries more than doubled their job-finding probability under the scheme. SA recipients saw a 67.3 per cent increase in their chances of securing employment.

Young people, regardless of gender, were the primary beneficiaries of the TOB’s impact, while foreigners saw fewer benefits compared to Maltese nationals. Notably, Gozitans experienced the largest improvement in job-finding rates among all demographics.

Additionally, the study found that skills played a crucial role in the effectiveness of the scheme.

Technicians and associate professionals saw the highest gains in job-finding probabilities, while managers, the highest-skilled group, benefited the least.

Interestingly, although self-employed individuals generally face lower chances of re-entering the job market after a benefit spell, the TOB scheme significantly boosted their employment prospects more than it did for non-self-employed individuals.

In terms of job retention, the research also found positive effects. The likelihood of job termination dropped by 11.8 percentage points for TOB-eligible individuals, and this positive effect remained robust over the medium term, even after the scheme ended.

However, SUP recipients, despite being the biggest beneficiaries of job-finding opportunities, faced a 48.8 per cent higher chance of job termination compared to those on SA.

The TOB scheme also notably enhanced the job tenure of technicians and associate professionals, but plant and machine operators and assemblers faced a higher probability of returning to unemployment.

While self-employed individuals generally benefitted from greater job retention, employees under the TOB scheme enjoyed even better tenure outcomes.

Given these findings, the TOB scheme can be seen as a success in bringing jobseekers closer to stable employment and helping to alleviate poverty traps.

However, the study suggests that further policies are needed to address groups who have seen less significant benefits from the scheme. Complementary policies should focus on enhancing job-finding rates and employment stability for all individuals, ultimately boosting Malta’s labor market resilience and strengthening the economy.

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