According to a recent report, the Department of Statistics of Malaysia release a report titled, the “Key Statistics of Labour Force in Malaysia” in October which stated that Malaysia has a total workforce of 15 million, with another 7.1 million non-working people comprising housewives, students, retirees and those who are not interested in working. The remaining 3.3% unemployed working-class Malaysians comprise an estimated 740,000 people.
The Malaysian Employer Federation in 2017 reported that there are around 1.7 million foreign workers (excluding the unregistered ones) in Malaysia.
Analysing these clearly uneven numbers, it is unlikely that unemployed Malaysians would be able to substitute for foreign workers or replace their jobs any time soon.
Based on these facts, the report noted that an R&D Manager a major textile firm in Malaysia in the Universiti Teknologi Malaysia (UTM) stated that he disagreed with Human Resources Minister’s effort to encourage industries to boost the salary scale of the “dangerous, difficult and dirty” jobs so that they would be lucrative enough for unemployed locals.
The expert noted that the lack of better-paying skilled jobs has left Malaysia’s unemployed graduates with no choice but to either seek opportunities in countries with higher currency values or to settle for unskilled jobs with salaries equivalent to foreign workers.
Noting that the situation is dire, the expert presented some solutions.
He noted that retrospectively observing the past, it is clear that foreign workers were brought into the country in the 1970s to work on rural plantations and construction sites. However, the rapid industrialisation and economic growth of the country in the 1980s and 1990s drove a demand for labour with lower wages. This attracted both documented and undocumented foreign workers in large numbers.
Interestingly, despite the fact that these workers eased production pressures and demand for low- wage labour, the same scenario is now deterring companies to move up the value chain, which poses a disadvantage to the economy in the upcoming industrial revolution.
The ease and availability of low-wage foreign labour have created deep distortions that disincentivise industries to transform. Aligned with Vision 2025, the transition to a high-income economy requires a major shift from labour-intensive business models to those that are driven by knowledge-rich, highly skilled services, productivity gains, a technological edge and sophisticated technical know-how.
According to Economic Developments 2017, an annual report on the Malaysian economy by Bank Negara Malaysia, the foreign labour share of the workforce has trended downwards lately, from 18.8% in 2007 to 12% in 2017.
Although the change can be noted as an encouraging sign towards a better economic transformation, Malaysia’s migrant population ratio is higher than that of our regional peers and comprises an 8.8% share of total migrants to the population.
The expert noted that Malaysia’s economy’s dependency on low-skilled foreign labour is evident as only 5.2% of the total foreign workforce were tertiary educated.
Thus, the expert suggested that the government should look into technological transformation in industry, such as automation, for a comprehensive solution to both the issues of dependency on foreign labour and unemployability of local graduates.
Firstly, the mindset has to change. Most industries are still engaged in a “race to the bottom” in relation to labour costs and are unwilling to pay more for technology despite the commensurable productivity gains it offers.
A Council member of the Malaysian Employer Federation recently suggested that the government should set up an independent automation technology fund to assist industries to adopt such technology quickly. The foreign labour levy may be used to initiate it.
The substitute for labour for technology may, in turn, also create new skilled jobs for local graduates, with better wages, killing two birds with one stone, according to the expert.
Ultimately, the Malaysian economy has to progress from input-based, cost suppression as a source of competitive strength, to a dynamic economy based on a skilled workforce, technology-assisted and creating high-value products.
This can be achieved by enacting well-aligned, coordinated and conducive government policies. These policies should focus on talent development, research and development, and industrial upgrading initiatives.