Malaysia University of Science and Technology professor Dr Geoffrey Williams.
KUALA LUMPUR: Malaysia’s job market, which has been on a positive growth trajectory so far this year, could face uncertainty due to local and global factors, say economists.
MIDF Research in a report said Malaysia’s labour market is anticipated to strengthen further in 2023 and 2024, backed by positive impetus in the domestic economy.
It said the country’s average unemployment rate is expected to decline further to 3.5% in 2023 and return to the pre-pandemic levels of 3.3% in 2024.
“The return of non-citizen workers is expected to boost overall employment and reduce the jobless rate.
“Continued improvement in the labour market will support consumer spending as the wage recipients-to-employment ratio had reached a new peak of 64.5% back in 2021, among others, thanks to the minimum wage salary policy.”
As of the first quarter of 2023, non-citizens’ employment was at approximately minus 4.4% compared with the pre-pandemic levels, said MIDF Research.
It added that as of the first half of 2023, employment grew by 2.7% year-on-year (y-o-y).
“Unemployment reduced by 10.4% y-o-y and the jobless rate averaged at 3.5%.”
Malaysia University of Science and Technology economics professor Geoffrey Williams, meanwhile, pointed out that low unemployment rates are not always a healthy sign.
“In Malaysia, the absence of social protection or meaningful unemployment benefits mean that people have to take work even if they are lowly paid.
“When the cost of living rises, individuals such as students who might otherwise be outside of the labour force, are forced to work,” he told StarBiz.
Williams said many of them often stopped studying to take on jobs.
“They take part-time work or temporary jobs to help household income even if they have no intention to continue.”
In analysing the country’s job market, Williams said one cannot just look at the unemployment rate.
“We need to look at the underemployment rate too. Time-related underemployment, which is people working short hours, has increased to 186,300, which is the highest since last year. People working less than 30 hours per week has risen to 280,400.”
Williams further explained that skills-related underemployment is at 1.9 million, which is 6.4% higher than 12 months ago and at levels last seen during the Covid-19 pandemic.
“Taking unemployment and underemployment together, we have 2.96 million people, which is almost 18% of the labour force.
“There are 7.18 million people outside of the labour force. So 10.14 million people are not working or unemployed on no salary or underemployed on low salaries. This is 42.4% of the working-age population.”
Williams added that half of Malaysians on formal contracts earn less than the living wage.
“Therefore, people are working because they have no choice when faced with a high cost of living. They are delaying their studies and earn very low wages. This is not a good scenario.”
Meanwhile, Centre for Market Education chief executive officer Carmelo Ferlito said Malaysia’s job market performance so far this year has been within expectations.
“However, by looking only at the aggregate numbers, we are missing part of the story.
“The right question, which nobody poses, is how much of this new employment is sustainable and consistent; and is it just the result of stimulus packages, and therefore, a cause of inflation and unsustainable in the long run?”
On the outlook of Malaysia’s job market, Ferlito said much would depend on the situation of international trade.
“This would mean both the world economy (Europe is already contracting) and Malaysia’s ability to shape new trade alliances to overcome its dependence on China.
“How effective will the government be in implementing the spirit of the Madani Economy? There are good principles in terms of regaining competitiveness, but these need to be translated into better policies, such as on labour and banking regulations.”
Going forward, Williams expects the labour force participation rate to remain around 70%, adding however that there will be a great deal of structural underemployment and continued reliance on low-paying jobs well into 2024.
“There are no factors that will improve the labour market this year and nothing in the foreseeable future, unless we have widespread structural reforms.
“The progressive wage system will only be voluntary and will not make a significant difference for many years.”
Williams added that labour market conditions are expected to remain unfavourable with low wages and high levels of underemployment.
“Salaries will remain low because many people are entering the labour market. Productivity will remain low and employees will get only 35 sen from every one ringgit of value they created,” he said.
