## 1mltea2025002-print-pdf

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---

### Electric Vehicle — Key findings on EV adoption
- At end-2023, about 1.3 percent of passenger cars were fully electric (EU average: 1.7 percent, EU median: 1 percent), and 7.8 percent of motorcycles.
- Overall, 13,000 EVs are registered, though more than 60 percent are motorcycles, e-bikes, and scooters, out of 438,000 vehicles in total.
- Malta’s EV fleet grew by around 50 percent in 2023 and more than doubled since 2021.
- Government target: increase the number of EVs to 65,000 by 2030, representing about 13 percent of all vehicles.
- Reaching the 65,000 target implies annual growth of 26 percent from end-2023.
- NRRP measures already implemented:
  - introduced large subsidies to encourage people to buy EVs (the subsidies will be reduced in 2025 but remain generous when compared to other EU member states),
  - provided scrapping incentives for conventional cars,
  - been installing a network of EV charging stations,
  - been procuring electric buses for public transport.

### Electric Vehicle — Impacts on electricity demand and system capacity
- Peak electricity demand rose from 465 MW in 2018 to 663 MW in 2023 (an increase of 43 percent).
- Peak temperatures (maximum mean temperature in the hottest month) rose from 27.3 °C to 29.6 °C; peak temperatures rose from 34 °C to almost 42 °C over the same period—contributing to higher air-conditioning-driven demand.
- EVs add to overall demand for electric power; they do not necessarily add to peak demand and can act as flexible storage but will significantly increase electricity demand over the next decade.
- Installed capacity (table figures):
  - Generation: 777
  - Fossil fuels: 533
  - Photovoltaic: 241
  - Other renewable: 3
  - Import: 225
  - Total: 1,002
- Additional temporary diesel power generation capacity of 60 MW was installed in 2023.
- A second interconnector with 225 MW capacity is scheduled for completion in 2026.
- Authorities project an increase of peak power demand of around 30 percent by 2040 under a high-temperature and high-population growth scenario; under this scenario, new generation and/or import capacity would be needed around 2033.
- Authorities maintain an “N-1” policy (power supply must be guaranteed even in the event of the failure of the largest power plant or interconnector).
- Planned/additional capacity measures cited:
  - construction of second interconnector (225 MW),
  - planned addition of battery storage and a waste incinerator,
  - continued growth of renewables (including plans to further increase PV capacity and battery storage),
  - development of offshore wind farms (to be built on floating platforms due to Mediterranean depth, posing technical challenges).

### Electric Vehicle — System and policy implications / recommendations
- To accommodate rapid EV growth and rising electricity demand the report highlights the need to:
  - identify options for additional generation capacity post-2030, including possibly further interconnectivity,
  - invest in smart grids to integrate EVs as flexible storage units and enhance consumer flexibility,
  - incentivize energy efficiency measures,
  - complement generation and storage investments (PV, battery storage, waste-to-energy) with distribution network upgrades (distribution capacity lagged behind demand spikes, contributing to outages in 2023).
- Government demand-side measures under the NRRP (subsidies, scrapping incentives, charging infrastructure, electric buses) are central to meeting the EV target but will be adjusted (subsidies reduced in 2025).
- Technical challenges for new technologies (floating offshore wind) and securing N-1 compliance suggest continued assessments of generation, import, and storage options.

### Transport infrastructure, congestion, and options
- Road network density and land use:
  - The road network density is "nine kilometers of road per square kilometer".
  - This is "21 times as many as in the Balearics, though only two-thirds of Singapore’s level."
  - A relatively high share of the total land area is devoted to transport infrastructure.
- Limits of expanding road capacity:
  - Experience in other countries suggests expansion of the road network only briefly relieves congestion as car ownership and use tend to rise with more roads available.
- Rail-based alternatives and constraints:
  - A rail-based public transport system could be effective to limit congestion and offer attractive alternatives to car use.
  - A metro would be very costly: a study cited concluded a metro system of 35 km length would cost "€6.2" (noted as "34 percent of 2022 GDP") and would take "15-20 years" to build. A first phase could be constructed within "five to eight years" and cost "€3.9 billion."
  - A tram network would encounter geographic constraints: more efficient than buses but would require surface space for tracks to contain costs.
- Pricing and short-term measures:
  - Pricing actions—e.g., on vehicle and fuel taxes, or parking charges—would be helpful to ease congestion.

### Infrastructure and investment needs — Conclusions
- Investment needs and timing:
  - Malta is facing significant investment needs in the short and medium term.
  - Power and water supply capacities are adequate in the short term, but investments to enhance capacity in the medium term are needed.
  - Investments are needed in wastewater treatment and solid waste disposal to reduce environmental stress and comply with EU targets.
  - Transport is the area where the need for action to ease congestion is urgent, while the costs for a sustainable solution are high and implementation would take time.
- Strategic planning:
  - Planning ahead is important; the planned launch of a strategic development plan (the “Vision Malta 2050”) offers an opportunity to spell out a longer-term development strategy, including the investment needs and costs.

### The impact of Artificial Intelligence on Malta’s labor market — Executive findings on AI, preparedness, and labor-market risk
- AI evolution and impact:
  - AI and Generative AI models have advanced to perform complex cognitive functions, process vast amounts of data, recognize patterns, and make decisions.
  - AI has the potential to reshape the job landscape across a broad range of skills and sectors; AI integration may also lead to job displacement during the transition.
- Malta’s digital preparedness:
  - Malta is "digitally well-prepared" and "well-placed to benefit from AI."
  - The IMF’s AI Preparedness Index (AIPI) indicates Malta aligns broadly with the average of advanced economies across "Regulation and Ethics," "Human Capital and Labor Market Policies," "Innovation and Economic Integration," and "Digital Infrastructure."
  - "63 percent" of the working age population have basic or above-basic digital skills, with particularly high skills in information and data literacy, communication, collaboration, and problem solving.
  - Maltese companies’ digital intensity is relatively high compared to the EU-27 average.
- Public funding and strategies:
  - Authorities allocate "€196 million or 1.0 percent of 2023 GDP" from multi-year EU funds for digital transformation.
  - With "80 percent of the existing AI strategy completed," an updated AI strategy is being prepared.
  - The 2021-2027 Smart Specialization Strategy and the National AI Strategy outline initiatives for AI leadership.

### AI adoption by companies and barriers (2023)
- "13.2 percent" of companies in Malta (excluding agriculture, fishing, mining, and the financial sector) used at least one AI technology in 2023.
- "83 percent" of AI-using companies are large firms with more than 50 employees.
- Sector adoption shares:
  - information and communication "35.3 percent";
  - administrative and support service activities "12.4 percent";
  - manufacturing "10.1 percent";
  - wholesale and retail trade "9.4 percent";
  - accommodation and food services "7.6 percent."
- Barriers to wider adoption:
  - Firms not yet using AI cite lack of relevant expertise, high costs, and system incompatibility as key barriers—challenges significantly higher than the EU average.

### Labor market structure, exposure, and complementarity measures
- Economic structure and main occupations:
  - Largest activities by value added and employment: professional, scientific, and technical activities; trade; travel, accommodation, and food services; public services—account for roughly half of economic output and two-thirds of employment.
  - Main occupations: business administration professionals, sales workers, and personal care workers.
- Methodology:
  - Exposure measure based on Felten et al (2021); complementarity measure based on Pizzinelli et al (2023).
  - Occupations categorized into four groups: 'High Exposure and High Complementarity' (HEHC), 'High Exposure and Low Complementarity' (HELC), 'Low Exposure and High Complementarity' (LEHC), and 'Low Exposure and Low Complementarity' (LELC).
  - Analysis applied to Malta 2023 Labor Force Survey microdata (~10,000 observations), across 40 occupations, 21 economic activities, 5 age groups, gender, 4 educational attainment groups, income, and 3 'country of birth' groupings.

### AI exposure and vulnerability — Key quantitative results
- Around "60 percent" of the labor market of Malta is highly exposed to AI.
- Approximately "30 percent" of the labor market is at risk of job displacement (high exposure with low complementarity).
- Malta exhibits slightly higher complementarity than other advanced economies.
- Distributional patterns and vulnerable groups:
  - Gender: Approximately "41 percent" of women employees fall into the high exposure and low complementarity category, compared to "27 percent" of men.
  - Education: "40 percent" of those with only a high school degree are in the high exposure and low complementarity category; tertiary education is associated with very high complementarity.
  - Age and income: Young people under "30" and those with low and lower-middle incomes are more at risk.
  - No major differences between Maltese nationals and immigrants in the high exposure and low complementarity category.
- Interpretation caveat:
  - The term ‘highly-exposed’ reflects occupations with an exposure score higher than the median across occupations; it is a relative measure.

### AI policy considerations and recommendations
- Reskilling and upskilling:
  - Prioritize reskilling and upskilling of the labor force via the education system and life-long learning.
  - National strategies in place: National Education Strategy "2024-30" and Lifelong Learning Strategy "2023-30."
  - Authorities have extended the Enterprise Skills Development Scheme to support SMEs and larger firms to provide training; authorities could review both the size of support and target groups.
- Support for SME digital adoption:
  - Bring Malta closer to the frontier of digitalization, especially private sector adoption in SMEs.
  - The Digital Decade Strategic Roadmap "2023-30" is a key pillar.
  - A digitalization grant (supported by EU Recovery and Resilience Facility funds) covers "50 percent" of expenses in digitalization of operations up to a maximum of "€50,000."
  - Recommendations include lowering the administrative burden of accessing public support schemes and continuing to roll out e-Government to boost private sector adoption and efficiency.
- Mitigating labor-market adjustment:
  - Use Malta’s already tight labor market to mitigate displacement effects.
  - Combine targeted reskilling/upskilling, support for SME digital adoption, and administrative simplification of support schemes.

### Female labor force participation — Trends and policies
- Participation and employment:
  - Female participation rate rose from 36 percent in the early 2000s to 73 percent today, above the EU27 average.
  - Women aged 25-49: participation rose from 38 percent in 2004 to 86 percent in 2023.
  - Women aged 50-64: participation is 54 percent.
  - Part-time share: a higher share of women work part-time compared to men, but the increased participation largely reflects an increase in full-time employment.
  - Foreign labor contribution: by 2023, foreign women represented approximately one-third of employed women.
  - Estimated macro impact: reforms account for half of the increase in female participation between 2008 and 2015, contributing to an estimated increase in potential GDP growth by around 0.3 percentage points during this period.

### Female labor force participation — Government policies and programs
- 2014 National Employment Policy: active labor market strategies focused on attracting women.
- Childcare and family supports:
  - Provision of free childcare services.
  - Tax credit for women returning to work after having children.
  - Tax deductions for childcare expenses, school fees, and medical expenses, alongside the long-standing child allowance.
- Work-life balance measures (introduced in 2022):
  - Extended period of paternity leave, parental leave, carers' leave.
  - Right to request flexible working arrangements for caregiving purposes.
  - Paid maternity leave increased from 14 weeks to 18 weeks.
  - Additional unpaid parental leave increased from three months to four months.
- Financial support and benefits:
  - In-Work Benefit Scheme (introduced in 2015): means-tested benefit supporting low-income working families and single parents.
  - 2019: maternity benefit rate of self-employed women raised to the national minimum wage.
- Targeting: measures successfully targeted women who were willing to work but not actively seeking work due to family and care reasons.

### Female labor force participation — Education, representation, and financial access
- Educational attainment and STEM:
  - Share of women with tertiary education rose to 34 percent, up from 10 percent two decades ago.
  - Men’s tertiary share: 27.6 percent.
  - Women excel in social sciences, humanities, and education; underrepresented in STEM.
  - Policy responses: scholarships, mentorships, partnerships, inclusive education policies, gender equality programs and awareness campaigns, support for professional development and flexible working arrangements.
- Representation and legal framework:
  - Women underrepresented in leadership roles across sectors despite stronger representation in public administration.
  - Parliamentary measures: a gender-equalizing mechanism introduced in the most recent election.
  - Adoption of EU directives including the Equal Treatment Directive, the Gender Equality Directive, and the Women on Boards Directive.
  - World Bank WBL Index scores (2022):
    - Legal frameworks: 77.5 (below EU average).
    - Supportive frameworks for implementing laws: 58.3.
    - Expert opinions score: 87.5.
  - Identified needs: greater implementation in Workplace equity, Pay, Parenthood, Entrepreneurship, and Pensions.
- Financial access gaps (2022):
  - Female share of outstanding household loans with commercial banks: 26.9 percent.
  - Male share of outstanding household loans with commercial banks: 73.1 percent.
  - Female share of household deposits: 42 percent.
  - Male share of household deposits: 58 percent.

### Gender pay gap empirical analysis and findings
- Data: approximately 20,000 anonymized micro data observations from Labor Force Surveys in 2013 and 2023.
- Median gender income gap:
  - About 14 percent in 2014.
  - Narrowed to about 4 percent in 2023.
- Regression approach:
  - Dependent variable: log of real yearly salary.
  - Methods: OLS for mean gaps; quantile regressions for distributional gaps.
  - Controls include: 7 age groups, 4 education levels, 3 birth places, 10 industries, 10 occupations, and part- vs full-time indicator.
  - Standard errors: Huber/White/sandwich estimator; Delta method for marginal effects.
- Mean and median pay gap estimates (Model 1):
  - Mean pay gap: 11.1 percent in 2013; 5.8 percent in 2023 (controlling for characteristics).
  - Median pay gap: 10.4 percent in 2013; 6.0 percent in 2023.
- Quantile regression findings (Model 2):
  - 2013: 90th percentile gap approximately 14 percent; 10th percentile gap around 10 percent.
  - 2023: 90th percentile gap decreased to 7.5 percent; 10th percentile gap decreased to about 6 percent.
- Interaction analysis (selected average marginal effects of being a woman conditional on group; robust standard errors in parentheses; significance: *** p<0.01, ** p<0.05, * p<0.1):
  - Age groups (2013 → 2023): 10-19: -0.122** → -0.079 (0.055) (0.084); 20-29: -0.112*** → -0.068*** (0.016) (0.024); 30-39: -0.102*** → -0.032 (0.018) (0.024); 40-49: -0.114*** → -0.075*** (0.021) (0.024); 50-59: -0.143*** → -0.072*** (0.022) (0.027); 60-69: -0.165*** → -0.102** (0.061) (0.045); 70-79: -0.515*** → -0.107 (0.139) (0.293).
  - Education levels: No formal/primary/lower secondary: -0.149*** → -0.118*** (0.015) (0.024); Upper secondary: -0.070*** → -0.085*** (0.018) (0.021); Post-secondary: -0.047* → -0.012 (0.027) (0.055); Short-cycle tertiary and above: -0.141*** → -0.024 (0.019) (0.021).
  - Place of birth: Malta: -0.114*** → -0.076*** (0.009) (0.013); Other EU-27: -0.097 → -0.010 (0.075) (0.058); Other non-EU-27: -0.248*** → -0.046 (0.063) (0.030).
  - Job type: Full-time: -0.128*** → -0.064*** (0.009) (0.014); Part-time: -0.055 → -0.024 (0.039) (0.057).
  - Industries (selected): Agriculture/forestry/fishing: -0.214** → 0.007 (0.102) (0.064); Manufacturing/energy/utilities: -0.087*** → -0.097** (0.022) (0.040); Trade/transport/accommodation/food services: -0.138*** → -0.075*** (0.020) (0.028); Information and communication: -0.125*** → 0.029 (0.047) (0.071); Public administration/education/health/social work: -0.115*** → -0.060*** (0.013) (0.019).
  - Occupations (selected): Managers: -0.131*** → -0.015 (0.035) (0.049); Professionals: -0.145*** → -0.055** (0.022) (0.026); Service and Sales Workers: -0.146*** → -0.067*** (0.020) (0.026); Plant and Machine Operators and Assemblers: -0.156*** → -0.121*** (0.030) (0.046); Elementary Occupations: -0.200*** → -0.195*** (0.031) (0.044); Armed Forces Occupations: 0.086*** → 0.220*** (0.027) (0.044).
- Key empirical conclusions:
  - Gender pay gaps have narrowed across age groups, education levels (particularly tertiary), places of birth (notably non-EU workers), full-time employment, sectors (services leading), and higher-skilled jobs.
  - Gaps persist among lower-education groups and at higher income percentiles, though reduced by 2023.
  - Part-time workers: gender gap remained statistically insignificant in 2023.

### Oaxaca-Blinder decomposition (2013–2023) — Findings and implications
- Total average pay gap decreased from 0.209 log points in 2013 to 0.092 log points in 2023.
- Explained portion of the gap (differences in observable characteristics) dropped from accounting for 43% of the total gap in 2013 to accounting for 10% of the total gap in 2023.
- Unexplained portion increased its share from 57% in 2013 to 89% in 2023, indicating that progress has equalized observable worker attributes while differences in returns to those attributes remain important.
- Table 2 selected values:
  - 2013: Log annual income: Men 9.839***; Women 9.629***; Gap 0.209***. Gap decomposition: Explained 0.089*** (Share 43%); Unexplained 0.120*** (Share 57%).
  - 2023: Log annual income: Men 9.912***; Women 9.821***; Gap 0.092***. Gap decomposition: Explained 0.009 (Share 10%); Unexplained 0.082*** (Share 89%).
- Policy directions:
  - Continue enhancing parental leave, flexible work arrangements, and promotion of women in leadership.
  - Maintain ongoing commitment to addressing both structural and cultural gender inequalities in the labor market.
  - Implement the government’s Gender Equality and Mainstreaming Strategy and Action Plan, 2022-2027, bringing a gender perspective into all stages and sectors of policymaking to drive further narrowing of gender gaps.

*Source: 1mltea2025002-print-pdf — excerpts provided from the IMF content unit.*

### 1. Electric Vehicle _______________________________________________________________________ 4

### 1. Electric Vehicle

### Key findings on electric vehicle (EV) adoption
- At end-2023, about 1.3 percent of passenger cars were fully electric (EU average: 1.7 percent, EU median: 1 percent), and 7.8 percent of motorcycles.
- Overall, 13,000 EVs are registered, though more than 60 percent are motorcycles, e-bikes, and scooters, out of 438,000 vehicles in total.
- Malta’s EV fleet grew by around 50 percent in 2023 and more than doubled since 2021.
- The government aims to increase the number of EVs to 65,000 by 2030, representing about 13 percent of all vehicles.
- Reaching the 65,000 target implies annual growth of 26 percent from end-2023.
- Under the National Recovery and Resilience Plan (NRRP) the government has:
  - introduced large subsidies to encourage people to buy EVs (the subsidies will be reduced in 2025 but remain generous when compared to other EU member states),
  - provided scrapping incentives for conventional cars,
  - been installing a network of EV charging stations,
  - been procuring electric buses for public transport.

### Impacts on electricity demand and system capacity
- Peak electricity demand rose from 465 MW in 2018 to 663 MW in 2023 (an increase of 43 percent).
- Peak temperatures (maximum mean temperature in the hottest month) rose from 27.3 °C to 29.6 °C; peak temperatures rose from 34 °C to almost 42 °C over the same period—contributing to higher air-conditioning-driven demand.
- EVs add to overall demand for electric power; they do not necessarily add to peak demand and can act as flexible storage but will significantly increase electricity demand over the next decade.
- Installed capacity (table figures):
  - Generation: 777
  - Fossil fuels: 533
  - Photovoltaic: 241
  - Other renewable: 3
  - Import: 225
  - Total: 1,002
- Additional temporary diesel power generation capacity of 60 MW was installed in 2023.
- A second interconnector with 225 MW capacity is scheduled for completion in 2026.
- Authorities project an increase of peak power demand of around 30 percent by 2040 under a high-temperature and high-population growth scenario; under this scenario, new generation and/or import capacity would be needed around 2033.
- The authorities maintain an “N-1” policy (power supply must be guaranteed even in the event of the failure of the largest power plant or interconnector).
- Planned/additional capacity measures cited:
  - construction of second interconnector (225 MW),
  - planned addition of battery storage and a waste incinerator,
  - continued growth of renewables (including plans to further increase PV capacity and battery storage),
  - development of offshore wind farms (to be built on floating platforms due to Mediterranean depth, posing technical challenges).

### System and policy implications / recommendations
- To accommodate rapid EV growth and rising electricity demand the report highlights the need to:
  - identify options for additional generation capacity post-2030, including possibly further interconnectivity,
  - invest in smart grids to integrate EVs as flexible storage units and enhance consumer flexibility,
  - incentivize energy efficiency measures,
  - complement generation and storage investments (PV, battery storage, waste-to-energy) with distribution network upgrades (distribution capacity lagged behind demand spikes, contributing to outages in 2023).
- The government’s demand-side measures under the NRRP (subsidies, scrapping incentives, charging infrastructure, electric buses) are central to meeting the EV target but will be adjusted (subsidies reduced in 2025).
- Technical challenges for new technologies (floating offshore wind) and securing N-1 compliance suggest continued assessments of generation, import, and storage options.

*Source: 1mltea2025002-print-pdf - 1. Electric Vehicle*

### 18.      The road network is already very dense—nine kilometers of road per square kilometer,

### 18.      The road network is already very dense—nine kilometers of road per square kilometer,

### Transport infrastructure, congestion, and options
- Road network density and land use
  - The road network density is "nine kilometers of road per square kilometer".
  - This is "21 times as many as in the Balearics, though only two-thirds of Singapore’s level."
  - A relatively high share of the total land area is devoted to transport infrastructure.
- Limits of expanding road capacity
  - Experience in other countries suggests expansion of the road network only briefly relieves congestion as car ownership and use tend to rise with more roads available.
- Rail-based alternatives and constraints
  - A rail-based public transport system could be effective to limit congestion and offer attractive alternatives to car use.
  - A metro would be very costly: a study cited concluded a metro system of 35 km length would cost "€6.2" (noted as "34 percent of 2022 GDP") and would take "15-20 years" to build. A first phase could be constructed within "five to eight years" and cost "€3.9 billion."
  - A tram network would encounter geographic constraints: more efficient than buses but would require surface space for tracks to contain costs.
- Pricing and short-term measures
  - Pricing actions—e.g., on vehicle and fuel taxes, or parking charges—would be helpful to ease congestion.

### G. Conclusions on infrastructure and investment needs
- Investment needs and timing
  - Malta is facing significant investment needs in the short and medium term.
  - Power and water supply capacities are adequate in the short term, but investments to enhance capacity in the medium term are needed.
  - Investments are needed in wastewater treatment and solid waste disposal to reduce environmental stress and comply with EU targets.
  - Transport is the area where the need for action to ease congestion is urgent, while the costs for a sustainable solution are high and implementation would take time.
- Strategic planning
  - Planning ahead is important; the planned launch of a strategic development plan (the “Vision Malta 2050”) offers an opportunity to spell out a longer-term development strategy, including the investment needs and costs.

*Source: 1mltea2025002-print-pdf — excerpts provided from the IMF content unit.*

### MALTA — THE IMPACT OF ARTIFICIAL INTELLIGENCE ON MALTA’S LABOR MARKET

### Executive findings on AI, preparedness, and labor-market risk
- AI evolution and impact
  - AI and Generative AI models have advanced to perform complex cognitive functions, process vast amounts of data, recognize patterns, and make decisions.
  - AI has the potential to reshape the job landscape across a broad range of skills and sectors; AI integration may also lead to job displacement during the transition.
- Malta’s digital preparedness
  - Malta is "digitally well-prepared" and "well-placed to benefit from AI."
  - The IMF’s AI Preparedness Index (AIPI) indicates Malta aligns broadly with the average of advanced economies across "Regulation and Ethics," "Human Capital and Labor Market Policies," "Innovation and Economic Integration," and "Digital Infrastructure."
  - "63 percent" of the working age population have basic or above-basic digital skills, with particularly high skills in information and data literacy, communication, collaboration, and problem solving.
  - Maltese companies’ digital intensity is relatively high compared to the EU-27 average.
- Public funding and strategies
  - Authorities allocate "€196 million or 1.0 percent of 2023 GDP" from multi-year EU funds for digital transformation.
  - With "80 percent of the existing AI strategy completed," an updated AI strategy is being prepared.
  - The 2021-2027 Smart Specialization Strategy and the National AI Strategy outline initiatives for AI leadership.

### AI adoption by companies and barriers
- Current adoption statistics (2023)
  - "13.2 percent" of companies in Malta (excluding agriculture, fishing, mining, and the financial sector) used at least one AI technology in 2023.
  - "83 percent" of AI-using companies are large firms with more than 50 employees.
  - Sector adoption shares: information and communication "35.3 percent"; administrative and support service activities "12.4 percent"; manufacturing "10.1 percent"; wholesale and retail trade "9.4 percent"; accommodation and food services "7.6 percent."
- Barriers to wider adoption
  - Firms not yet using AI cite lack of relevant expertise, high costs, and system incompatibility as key barriers—challenges significantly higher than the EU average—suggesting potential labor and skill shortages and financial constraints.

### Labor market structure, exposure, and complementarity measures
- Economic structure and main occupations
  - Largest activities by value added and employment: professional, scientific, and technical activities; trade; travel, accommodation, and food services; public services—account for roughly half of economic output and two-thirds of employment.
  - Main occupations: business administration professionals, sales workers, and personal care workers.
- Methodology for exposure/complementarity
  - Exposure measure based on Felten et al (2021); complementarity measure based on Pizzinelli et al (2023).
  - Occupations categorized into four groups: 'High Exposure and High Complementarity' (HEHC), 'High Exposure and Low Complementarity' (HELC), 'Low Exposure and High Complementarity' (LEHC), and 'Low Exposure and Low Complementarity' (LELC).
  - Analysis applied to Malta 2023 Labor Force Survey microdata (~10,000 observations), across 40 occupations, 21 economic activities, 5 age groups, gender, 4 educational attainment groups, income, and 3 'country of birth' groupings.

### Key quantitative exposure and vulnerability results
- Aggregate exposure and displacement risk
  - Around "60 percent" of the labor market of Malta is highly exposed to AI.
  - Approximately "30 percent" of the labor market is at risk of job displacement (high exposure with low complementarity).
  - This share is broadly similar to that estimated for other advanced economies.
  - Malta exhibits slightly higher complementarity than other advanced economies.
- Distributional patterns and vulnerable groups
  - Gender: Approximately "41 percent" of women employees fall into the high exposure and low complementarity category, compared to "27 percent" of men.
  - Education: "40 percent" of those with only a high school degree are in the high exposure and low complementarity category; tertiary education is associated with very high complementarity.
  - Age and income: Young people under "30" and those with low and lower-middle incomes are more at risk.
  - No major differences between Maltese nationals and immigrants in the high exposure and low complementarity category.
- Interpretation caveats
  - The term ‘highly-exposed’ reflects occupations with an exposure score higher than the median across occupations; it is a relative measure.

### Policy considerations and recommendations
- Reskilling and upskilling
  - Prioritize reskilling and upskilling of the labor force via the education system and life-long learning.
  - National strategies in place: National Education Strategy "2024-30" and Lifelong Learning Strategy "2023-30."
  - Authorities have extended the Enterprise Skills Development Scheme to support SMEs and larger firms to provide training; authorities could review both the size of support and target groups.
- Support for SME digital adoption
  - Bring Malta closer to the frontier of digitalization, especially private sector adoption in SMEs.
  - The Digital Decade Strategic Roadmap "2023-30" is a key pillar.
  - A digitalization grant (supported by EU Recovery and Resilience Facility funds) covers "50 percent" of expenses in digitalization of operations up to a maximum of "€50,000"—important because SMEs are the large majority of companies in Malta.
  - Recommendations include lowering the administrative burden of accessing public support schemes and continuing to roll out e-Government to boost private sector adoption and efficiency.
- Mitigating measures for labor-market adjustment
  - Use Malta’s already tight labor market to mitigate displacement effects.
  - Combine targeted reskilling/upskilling, support for SME digital adoption, and administrative simplification of support schemes.

*Source: 1mltea2025002-print-pdf — excerpts provided from the IMF content unit.*

### 1.      Female labor force participation in Malta has significantly increased over the past two

### 1mltea2025002-print-pdf - 1.      Female labor force participation in Malta has significantly increased over the past two

### Labor force participation and employment
- Female participation rate rose from 36 percent in the early 2000s to 73 percent today, above the EU27 average.
- Women aged 25-49: participation rose from 38 percent in 2004 to 86 percent in 2023.
- Women aged 50-64: participation is 54 percent.
- Part-time share: a higher share of women work part-time compared to men, but the increased participation largely reflects an increase in full-time employment.
- Foreign labor contribution: by 2023, foreign women represented approximately one-third of employed women.
- Estimated macro impact: reforms account for half of the increase in female participation between 2008 and 2015, contributing to an estimated increase in potential GDP growth by around 0.3 percentage points during this period.

### Government policies and programs (measures introduced since 2014)
- 2014 National Employment Policy: active labor market strategies focused on attracting women.
- Childcare and family supports:
  - Provision of free childcare services.
  - Tax credit for women returning to work after having children.
  - Tax deductions for childcare expenses, school fees, and medical expenses, alongside the long-standing child allowance.
- Work-life balance measures (introduced in 2022):
  - Extended period of paternity leave, parental leave, carers' leave.
  - Right to request flexible working arrangements for caregiving purposes.
  - Paid maternity leave increased from 14 weeks to 18 weeks.
  - Additional unpaid parental leave increased from three months to four months.
- Financial support and benefits:
  - In-Work Benefit Scheme (introduced in 2015): means-tested benefit supporting low-income working families and single parents.
  - 2019: maternity benefit rate of self-employed women raised to the national minimum wage.
- Targeting: measures successfully targeted women who were willing to work but not actively seeking work due to family and care reasons.

### Educational attainment and STEM representation
- Tertiary education attainment:
  - Share of women with tertiary education rose to 34 percent, up from 10 percent two decades ago.
  - Men’s tertiary share: 27.6 percent.
- Fields of study: women excel in social sciences, humanities, and education; underrepresented in STEM.
- Policy responses:
  - Scholarships, mentorships, and partnerships to boost female participation in STEM.
  - Inclusive education policies to eliminate gender biases.
  - Gender equality programs and awareness campaigns to challenge stereotypes and promote gender balance.
  - Support for professional development and flexible working arrangements to aid career advancement.

### Representation, legal framework, and financial access
- Senior positions: women underrepresented in leadership roles across sectors despite stronger representation in public administration.
- Parliamentary measures: a gender-equalizing mechanism introduced in the most recent election.
- Legal framework:
  - Adoption of EU directives including the Equal Treatment Directive, the Gender Equality Directive, and the Women on Boards Directive.
  - World Bank WBL Index score for Malta’s legal frameworks: 77.5 (below EU average).
  - Supportive frameworks for implementing laws score: 58.3.
  - Expert opinions score: 87.5.
  - Identified needs: greater implementation in Workplace equity, Pay, Parenthood, Entrepreneurship, and Pensions.
- Financial access gaps (2022):
  - Female share of outstanding household loans with commercial banks: 26.9 percent.
  - Male share of outstanding household loans with commercial banks: 73.1 percent.
  - Female share of household deposits: 42 percent.
  - Male share of household deposits: 58 percent.
- Possible drivers: risk-based lending, lower incomes, fewer assets, and lower collateral base among women.

### Empirical study of gender income gaps (Labor Force Survey microdata analysis)
- Data: approximately 20,000 anonymized micro data observations from Labor Force Surveys in 2013 and 2023 provided by Malta’s NSO.
- Income trends: real yearly incomes increased for both men and women between 2013 and 2023.
- Median gender income gap:
  - About 14 percent in 2014.
  - Narrowed to about 4 percent in 2023.
- Regression approach:
  - Dependent variable: log of real yearly salary.
  - Methods: OLS for mean gaps; quantile regressions for distributional gaps.
  - Controls include: 7 age groups, 4 education levels, 3 birth places, 10 industries, 10 occupations, and part- vs full-time indicator.
  - Standard errors: Huber/White/sandwich estimator; Delta method for marginal effects.
- Mean and median pay gap estimates (Model 1):
  - Mean pay gap: 11.1 percent in 2013; 5.8 percent in 2023 (controlling for characteristics).
  - Median pay gap: 10.4 percent in 2013; 6.0 percent in 2023.
- Quantile regression findings (Model 2):
  - 2013: 90th percentile gap approximately 14 percent; 10th percentile gap around 10 percent.
  - 2023: 90th percentile gap decreased to 7.5 percent; 10th percentile gap decreased to about 6 percent.
- Interaction analysis (gender × characteristic) — selected results from Table 1 (average marginal effects of being a woman conditional on group; robust standard errors in parentheses; significance: *** p<0.01, ** p<0.05, * p<0.1):
  - Age groups (2013 → 2023): 10-19: -0.122** → -0.079 (0.055) (0.084); 20-29: -0.112*** → -0.068*** (0.016) (0.024); 30-39: -0.102*** → -0.032 (0.018) (0.024); 40-49: -0.114*** → -0.075*** (0.021) (0.024); 50-59: -0.143*** → -0.072*** (0.022) (0.027); 60-69: -0.165*** → -0.102** (0.061) (0.045); 70-79: -0.515*** → -0.107 (0.139) (0.293).
  - Education levels: No formal/primary/lower secondary: -0.149*** → -0.118*** (0.015) (0.024); Upper secondary: -0.070*** → -0.085*** (0.018) (0.021); Post-secondary: -0.047* → -0.012 (0.027) (0.055); Short-cycle tertiary and above: -0.141*** → -0.024 (0.019) (0.021).
  - Place of birth: Malta: -0.114*** → -0.076*** (0.009) (0.013); Other EU-27: -0.097 → -0.010 (0.075) (0.058); Other non-EU-27: -0.248*** → -0.046 (0.063) (0.030).
  - Job type: Full-time: -0.128*** → -0.064*** (0.009) (0.014); Part-time: -0.055 → -0.024 (0.039) (0.057).
  - Industries (selected): Agriculture/forestry/fishing: -0.214** → 0.007 (0.102) (0.064); Manufacturing/energy/utilities: -0.087*** → -0.097** (0.022) (0.040); Trade/transport/accommodation/food services: -0.138*** → -0.075*** (0.020) (0.028); Information and communication: -0.125*** → 0.029 (0.047) (0.071); Public administration/education/health/social work: -0.115*** → -0.060*** (0.013) (0.019).
  - Occupations (selected): Managers: -0.131*** → -0.015 (0.035) (0.049); Professionals: -0.145*** → -0.055** (0.022) (0.026); Service and Sales Workers: -0.146*** → -0.067*** (0.020) (0.026); Plant and Machine Operators and Assemblers: -0.156*** → -0.121*** (0.030) (0.046); Elementary Occupations: -0.200*** → -0.195*** (0.031) (0.044); Armed Forces Occupations: 0.086*** → 0.220*** (0.027) (0.044).
- Key empirical conclusions:
  - Gender pay gaps have narrowed across age groups, education levels (particularly tertiary), places of birth (notably non-EU workers), full-time employment, sectors (services leading), and higher-skilled jobs.
  - Gaps persist among lower-education groups and at higher income percentiles, though reduced by 2023.
  - Part-time workers: gender gap remained statistically insignificant in 2023.

*Prepared by Thomas Gade (EUR), Agnese Carella (EUR), Diego Gomes (SPR), and Jiajia Gu (SPR).*

### 14.      The “Oaxaca-Blinder decomposition” suggests that the narrowing of the gender pay

### 14.      The “Oaxaca-Blinder decomposition” suggests that the narrowing of the gender pay

### Oaxaca-Blinder findings (2013–2023)
- The Oaxaca-Blinder decomposition captures differences in returns to observed characteristics between groups.
- The total average pay gap decreased from 0.209 log points in 2013 to 0.092 log points in 2023.
- The explained portion of the gap (differences in observable characteristics) dropped from accounting for 43% of the total gap in 2013 to accounting for 10% of the total gap in 2023.
- The unexplained portion (differences in how observable characteristics are rewarded) increased its share from 57% in 2013 to 89% in 2023.
- The shift indicates significant progress in equalizing observable worker attributes.
- Footnote: The observable characteristics considered are the same as those used as controls in the regressions.
- Clarification: The unexplained component of the Oaxaca-Blinder decomposition captures differences in returns to observed characteristics between groups, not omitted variables effects.

### Table 2 — Malta: Oaxaca-Blinder Decomposition (selected values)
- 2013
  - Log annual income: Men 9.839***; Women 9.629***; Gap 0.209***
  - Gap decomposition: Explained 0.089*** (Share 43%); Unexplained 0.120*** (Share 57%)
- 2023
  - Log annual income: Men 9.912***; Women 9.821***; Gap 0.092***
  - Gap decomposition: Explained 0.009 (Share 10%); Unexplained 0.082*** (Share 89%)
- Significance notation: *** p<0.01, ** p<0.05, * p<0.1

### Conclusion and policy considerations
- Progress and remaining gaps
  - Malta has made significant progress reducing gender gaps over the last two decades, but gaps remain in representation in senior positions and incomes.
  - The female participation rate has increased to 73 percent — above the EU average — driven by active government policies and an inflow of foreign workers.
  - Malta’s legal framework for preventing gender discrimination is sound.
  - Despite a higher share of women with a tertiary education than men, representation of women in senior positions remains low in the private sector.
  - Income gaps persist, especially for women with less than tertiary education, in technical functions, and across most age categories, although the overall income gap narrowed significantly during the last decade.
- Policy directions
  - Continue enhancing parental leave, flexible work arrangements, and promotion of women in leadership.
  - Maintain ongoing commitment to addressing both structural and cultural gender inequalities in the labor market.
  - Implement the government’s Gender Equality and Mainstreaming Strategy and Action Plan, 2022-2027, bringing a gender perspective into all stages and sectors of policymaking to drive further narrowing of gender gaps.

*Source: IMF — Chapter excerpt on Oaxaca-Blinder decomposition and gender gaps in Malta (selected content).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1mltea2025002-print-pdf.pdf_