Founder and director of Williams Business Consultancy Sdn Bhd and economist Dr Geoffrey Williams.
PETALING JAYA: Despite low unemployment levels, there are still signs that many Malaysians are still struggling financially, say economists.
Malaysia’s job market hit nine million in the third quarter of this year (3Q24), the highest in six years.
Founder and director of Williams Business Consultancy Sdn Bhd and economist Geoffrey Williams noted that more people are joining the labour force due to the high cost of living.
“However, this is not a good signal because they are young adults who are dropping out of college to earn an income for their families.
“Additionally, older individuals are taking part-time jobs to help with the household income,” he told StarBiz.
According to the Statistics Department, Malaysia’s unemployment rate dipped to 3.2% (from 3.3% in 2Q24), lower than the pre-pandemic 2019’s average level of 3.3%.
Williams noted that unemployment is remaining low, but emphasised that underemployment has become a structural problem.
“People take jobs below their qualifications because they have no choice and need to support themselves and their families.”
Furthermore, Williams pointed out that wages are still low and stagnant.
“Median wages fell 6.8% from RM2,945 to RM2,745 in the first half of the year. This means that half of people on formal private sector contracts are essentially ‘working poor’. They have a job, but are still struggling to make ends meet.
“As the cost of living rises, the amount you can buy with your wage, the so-called median ‘real wage’, has fallen by almost 9%,” said Williams.
He explained that the downward pressure on wages is due to higher labour force participation (especially among younger individuals) and the cost of living.
“Wages are forced down and prices are rising.
“Also, in manufacturing persistently low productivity and manufacturing wages have been falling in real terms since the Covid-19 pandemic.”
Going into 4Q24, Williams said labour market trends should remain steady.
In 4Q24, unemployment will be low as usual; underemployment will be high as usual; and wages will barely cover rising prices for most people.”
Centre for Market Education chief executive officer Carmelo Ferlito also said he expects a steady labour market in 4Q24.
“Looking at the trend and the closeness to the natural rate of unemployment, I do not expect any sensible changes when compared to the current situation.
“I believe that in quantitative terms, the market does not require a spur. Eventually, we should look at the mismatch between labour demand and supply, in qualitative terms.”
Williams meanwhile said the labour market is “correcting itself.”
“This is because people are moving more into the gig-economy, micro-enterprises, freelancing and side hustles.
“This is because formal employment is a very bad deal with low wages, bad terms and conditions and not enough flexibility.”
Meanwhile, UOB senior economist Julia Goh and economist Loke Siew Ting said in a research note that they are maintaining their year-end jobless rate forecasts at 3.2% for 2024 and 3% for 2025.
“In addition to numerous initiatives outlined in the national master plans to boost investments and employment, several measures were also unveiled in the 2025 Budget to reform the domestic labour market to uplift income and expand the talent pool.
“Nevertheless, those measures are expected to increase business costs amid a more challenging global economic environment next year, which may, in turn, weigh on corporates’ recruitment plan and warrant a close eye on the potential consequences.”
They noted that key external downside risk could potentially be the adverse impact of US President-elect Donald Trump’s blanket tariff policy of up to 20% on all countries exporting goods to the United States; and the hefty 60% tariffs on US imports from China.
“This may affect Malaysia’s manufacturing sector the most, which is the second top contributor to the nation’s employment after the services sector.”
