KRI PRESS |
Nov 3, 2020
Evolving economy, changing work realities
3rd November 2020, Kuala Lumpur — Malaysia’s most common occupation, sales & services work which make up about one-fourth of total employment, are estimated to face higher automation risk in light of technological advancement, according to Khazanah Research Institute’s (KRI) latest publication, Work in an Evolving Malaysia: The State of Households 2020 Part II (SOH2020).
The report highlighted that most jobs with higher automation risk are also found to be least likely to be able to work from home, making the workers more vulnerable under the on-going pandemic situation. Yet, unavoidable lags in modern technological adoption provide opportunities for policy intervention to ensure that workers can benefit and complement technology, rather than being displaced, the report says.
Evolving economic structure and workforce
Despite considerable labour market achievements, differences in the workforce outcomes persist on the back of different economic settings. The second part of SOH2020 edition takes a regional perspective and examines the long-term labour market trends in the last three decades.
It notes that while Malaysia’s economic structure has evolved over the years, concentration of economic activities continues to differ between states. Notably, agriculture employment share has declined from 31.2% of total employment in 1982 to 10.2% in 2019, but the sector remains an important source of employment in the north and east coast states of peninsular as well as in Sabah and Sarawak. For example, agriculture employment share was 26.0% of total employment in Sabah and 20.8% in Pahang in 2019, higher than the national average.
Manufacturing employment shares expanded for all states in the early 1990s with the national share peaking at 23.5% of total employment in 2000. The share receded to 17.8% in 2019 as all states gradually moved into services, although states like Pulau Pinang and Johor continue to have higher manufacturing employment shares than the rest, at 37.1% and 25.0% respectively in 2019.
Services: diversity behind the size
With an employment share of 62.9% per total employment in 2019, services as a sector is large and diverse. Between 2009 and 2019, employment share of “traditional services” such as wholesale & retail, food & beverages and accommodation expanded by 5.5 percentage points (ppt) from 34.8% of total employment to 40.3%, while employment share of “modern services” such as finance, information & communication, and professional services contracted by 1.2 ppt from 8.0% of total employment to 6.8%.
“Modern services” which typically recorded higher pay than the average pay in most other sectors, are more common in the central region (Kuala Lumpur, Selangor and Putrajaya), with an average employment share of around 15.0% of total employment, tripled the shares in other states (less than 5.0%).
In contrast, services employment in other states expanded more in “traditional services”. For example, the employment share increased by 7.4 ppt from 30% of total employment in 2009 to 37.4% in 2019 for Sabah, Sarawak and Labuan. While the shift to services provide job opportunities for many, employment in “traditional services” generally delivers lower pay and more likely to offer irregular and non-standard employment compared to “modern services”.
Concomitantly, employment shares of “social services” like education and public administration contracted by 1.4 ppt across Malaysia from 17.2% of total employment in 2009 to 15.8% in 2019. The shrinking is a concern as these services are not only essential to the well-being of the rakyat, but also are more likely to employ skilled workers, provide stable jobs and better pay.
The report emphasises that while the challenging socio-economic conditions underscore the critical need to intensify efforts to transform the economy, supporting workers in manoeuvring the change must be at the core of policy response to ensure the well-being of the nation. Meanwhile, continuous assessment of regional policies, as well as coherent and sound industrial policies are key to addressing relevant gaps among workers and households in different parts of the country.
Other key takeaways from the report include:
Along with the uneven economic concentration, there has been a divergence in labour market outcomes. The central region (Kuala Lumpur, Selangor and Putrajaya) continue to chart higher labour force participation rates especially among women, and lower unemployment rates than other states. The concentration of better-pay economic activities, skilled and educated workers in the central region explains their higher wages and higher household income levels compared to other states or regions.
Paid employment is common, but vulnerable employment is on the rise. In the central region, close to 80% of workers have paid-employment jobs with stable employer-employee relations, but even here, vulnerable employment (i.e. own account workers and unpaid family workers) have been rising in recent years, indicating the potential rise of decent work deficits among workers there.
Investments grew rapidly in during industrialisation in 1990s but moderated as the country became more services oriented. Not only accumulation of tangible capital has slowed in recent years, lack of intangible capital investment such as research and development activities may dampen the demand for skilled workforce.
Work in an Evolving Malaysia is Part II of KRI ’s The State of Households 2020 series. Part I titled Welfare in Malaysia Across Three Decades was released in early October, while Part III titled Social Inequalities and Health in Malaysia will be released in mid-November 2020. For a detailed look into the report, visit www.krinstitute.org.
The report highlighted that most jobs with higher automation risk are also found to be least likely to be able to work from home, making the workers more vulnerable under the on-going pandemic situation. Yet, unavoidable lags in modern technological adoption provide opportunities for policy intervention to ensure that workers can benefit and complement technology, rather than being displaced, the report says.
Evolving economic structure and workforce
Despite considerable labour market achievements, differences in the workforce outcomes persist on the back of different economic settings. The second part of SOH2020 edition takes a regional perspective and examines the long-term labour market trends in the last three decades.
It notes that while Malaysia’s economic structure has evolved over the years, concentration of economic activities continues to differ between states. Notably, agriculture employment share has declined from 31.2% of total employment in 1982 to 10.2% in 2019, but the sector remains an important source of employment in the north and east coast states of peninsular as well as in Sabah and Sarawak. For example, agriculture employment share was 26.0% of total employment in Sabah and 20.8% in Pahang in 2019, higher than the national average.
Manufacturing employment shares expanded for all states in the early 1990s with the national share peaking at 23.5% of total employment in 2000. The share receded to 17.8% in 2019 as all states gradually moved into services, although states like Pulau Pinang and Johor continue to have higher manufacturing employment shares than the rest, at 37.1% and 25.0% respectively in 2019.
Services: diversity behind the size
With an employment share of 62.9% per total employment in 2019, services as a sector is large and diverse. Between 2009 and 2019, employment share of “traditional services” such as wholesale & retail, food & beverages and accommodation expanded by 5.5 percentage points (ppt) from 34.8% of total employment to 40.3%, while employment share of “modern services” such as finance, information & communication, and professional services contracted by 1.2 ppt from 8.0% of total employment to 6.8%.
“Modern services” which typically recorded higher pay than the average pay in most other sectors, are more common in the central region (Kuala Lumpur, Selangor and Putrajaya), with an average employment share of around 15.0% of total employment, tripled the shares in other states (less than 5.0%).
In contrast, services employment in other states expanded more in “traditional services”. For example, the employment share increased by 7.4 ppt from 30% of total employment in 2009 to 37.4% in 2019 for Sabah, Sarawak and Labuan. While the shift to services provide job opportunities for many, employment in “traditional services” generally delivers lower pay and more likely to offer irregular and non-standard employment compared to “modern services”.
Concomitantly, employment shares of “social services” like education and public administration contracted by 1.4 ppt across Malaysia from 17.2% of total employment in 2009 to 15.8% in 2019. The shrinking is a concern as these services are not only essential to the well-being of the rakyat, but also are more likely to employ skilled workers, provide stable jobs and better pay.
The report emphasises that while the challenging socio-economic conditions underscore the critical need to intensify efforts to transform the economy, supporting workers in manoeuvring the change must be at the core of policy response to ensure the well-being of the nation. Meanwhile, continuous assessment of regional policies, as well as coherent and sound industrial policies are key to addressing relevant gaps among workers and households in different parts of the country.
Other key takeaways from the report include:
Along with the uneven economic concentration, there has been a divergence in labour market outcomes. The central region (Kuala Lumpur, Selangor and Putrajaya) continue to chart higher labour force participation rates especially among women, and lower unemployment rates than other states. The concentration of better-pay economic activities, skilled and educated workers in the central region explains their higher wages and higher household income levels compared to other states or regions.
Paid employment is common, but vulnerable employment is on the rise. In the central region, close to 80% of workers have paid-employment jobs with stable employer-employee relations, but even here, vulnerable employment (i.e. own account workers and unpaid family workers) have been rising in recent years, indicating the potential rise of decent work deficits among workers there.
Investments grew rapidly in during industrialisation in 1990s but moderated as the country became more services oriented. Not only accumulation of tangible capital has slowed in recent years, lack of intangible capital investment such as research and development activities may dampen the demand for skilled workforce.
Work in an Evolving Malaysia is Part II of KRI ’s The State of Households 2020 series. Part I titled Welfare in Malaysia Across Three Decades was released in early October, while Part III titled Social Inequalities and Health in Malaysia will be released in mid-November 2020. For a detailed look into the report, visit www.krinstitute.org.
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