In
Malaysia, there are at least two million migrant workers mostly from Indonesia
and Bangladesh, making up 15% of the total employed persons. Since Malaysia
went into lockdown in March 2020, the Malaysian Trades Union Congress (MTUC)
has reported cases of violation of migrant workers’ rights by their
employers, including unfair termination, unpaid wages, poor living conditions
and more (Top Glove is a good example). Those who were laid off would have lost
their work passes, forcing them to become undocumented. Since May 2020, the
Malaysian government has conducted several immigration raids, detaining more than 18,000 undocumented
migrant workers. Many
became infected as the over-crowded detention centres
became coronavirus hotspots. These
cases are just the tip of the iceberg—without any official account, the fate of
other undocumented migrant workers remains largely unknown.
The
Malaysian government has arguably provided only limited assistance to the
migrant population. So far, one of the most prominent government initiatives
related to the workers is the 25% cut for the migrant worker levy for the rest
of the year.
However,
even from a purely economic perspective, the “citizens’ welfare-comes-first”
ideology must give way to an inclusive protection measure. Although some may
argue that given limited resources, governments have an obligation to
prioritise its citizens over migrants, there are several strong economic
arguments against the marginalisation of migrant workers.
Malaysia’s
economy has long been reliant on the migrant workforce. In 2019, migrant
workers made up more than 30% of the workforce in the agriculture sector, and
more than 20% in both the construction and manufacturing sectors (Figure 1).
Almost half of the low-skilled workers in Malaysia were of foreign origins. For
semi-skilled jobs, where the bulk of jobs are, more than one in 10 were migrant
workers. Overall, it has been estimated that 22% of the establishments in Malaysia
hired migrant workers.
Figure
1: Migrant workers are important to Malaysia’s economy
Figure 2:
The
importance of migrant workers in the manufacturing and services sectorIn July
2020, the Malaysian government announced that migrant workers are limited to working
only in the agriculture, plantation and construction sectors, as part of its
strategy to keep Malaysians employed.
Despite
their relatively low share of migrant workers, the manufacturing and services
sectors actually hired the largest number of migrant workforce, totalling
almost 1.5 million persons (Figure 2). The number of migrant workers employed
in both sectors is the fastest-growing ever since 2010. Furthermore, the
manufacturing sector also recorded one of the highest percentages of
establishments (63%) that employed migrant workers in 2018.
The idea
that without migrant workers, firms can easily hire locals to replace them
misses an important point—migrant and local workers are generally imperfect
substitutes. Between 2010 and 2019, most of the migrant workers who entered the
labour market had at most a secondary education (Figure 3). By contrast, the
Malaysian labour force is getting more educated—there have been fewer people
with only primary education or less, and nearly two million more who are
tertiary-educated. This partly explains why within the same decade, most
migrant workers tended to go into low-skilled jobs, whereas Malaysians were
mostly hired in skilled and semi-skilled occupations.
Figure 3:
Migrant and local workers occupy different occupational space
Lower-educated,
low-skilled migrant workers often take on jobs that are deemed dirty, dangerous
and difficult (3D), which are also jobs that Malaysians usually shun. Indeed,
based on a survey conducted by the Malaysian Employers
Federation (MEF) involving 101 member companies, around 78% of the companies
reported that the main reason for them to recruit migrant workers was the
“shortage of local workers to fill vacancies”.
Hence, in
requiring employers to hire only local workers post-lockdown, the government
may be putting employers in a very challenging position. For example, following
the government’s directive to stop hiring migrant workers, market traders at
the wholesale and wet markets have found it hard to hire. The jobs that migrant workers do are often too
demanding for the locals, that it now takes two locals to handle one migrant
worker’s workload. As such, the market has been functioning at less than 20% of
its full capacity due to the manpower disruption.
It
is also observed that industries with low productivity have a high share of
low-skilled foreign workers (Figure 4), with a greater reliance on longer
working hours to produce output. One study found that South Korea increased
real GDP per hour from USD4.7 in 1980 to USD25.4 in 2010, while Malaysia only
registered an increase to USD7.1 in 2010 from USD5.3 in 2000. South Korea did
this while reducing average weekly working hours from 49 hours to 44 hours from
2000 to 2008, while Malaysia held steady
at 49 hours. Malaysia’s labour-intensive methods and longer working hours are
clearly less efficient than those obtained through technological advancement
and automation. This is seen through the gap between Malaysia and Asia’s
average usage of industrial manufacturing robots (Figure 5).
Figure 4:
Productivity and Share of Foreigners by Industries
Figure 5:
Robot Density in the Manufacturing Sector (2016)
From the
workers’ perspectives, automation and new technology are bound to replace jobs,
and it is Malaysians who are at the highest risk of job displacement, not
migrant workers. Based on the findings by KRI, in the next two decades,
54% of all jobs in Malaysia could be displaced by technology. Four out of five
of these high-risk jobs are semi-skilled jobs. Malaysians will be most affected
because 86% of all semi-skilled jobs are held by Malaysians. The hollowing out
of semi-skilled jobs by technology has already been evident since 2000 (Figure 6).
The void is only expected to deepen further with the rapid progress in
technology.
Figure 6:
The disappearing middle
The road
to economic transformation comes with its own set of labour and industrial
challenges. Reducing Malaysia’s reliance on migrant workers could be an
important policy lever to drive transformation. That pre-supposes sound labour,
industrial and education policies that will see a sustainable creation of
quality jobs, and prepare all Malaysians for the rapidly evolving employment
landscape.
What can
we do in the immediate term? We need to improve our thoughts (and deeds) on
migrant workers. They are here as our guests. We cannot and will not do their
jobs. There is need for compassion and basic improvements to work and living
conditions. Next, we need to reduce the levy or create a graduated scale for
different sectors. In addition, we need to review our automation/robotics
strategy. If South Korea can do it, why can’t we?
For
Malaysians, it is good if the Government planners work closely with industry
and tertiary institutions. Otherwise, we may have surpluses in humanities,
Islamic knowledge and/or medicine. It is disheartening for parents when their
children graduate but cannot find a suitable job. Then we want more people to
do STEM when the prospects seem so limited. Learn from Singapore, how to do
R&D clusters or other similar strategies to encourage start-ups and
innovation.
Don’t
think too long! Don’t need a Vision 2030! Just look at Vision 2020, and what a
disaster that has become – and as usual, no review or audit of that failure.
Going
forward, Just do it! (if not buy a Nike?).
References:
1. The economic case against the marginalisation of migrant workers in
Malaysia, Tan Theng Theng, Jarud Romadan, October 1st, 2020 (https://blogs.lse.ac.uk)
2.Low-skilled foreign workers distortions to the economy, Ang Jian
Wei, Athreya Murugasu, Chan Yi Wei, Economics Department, Bank Negara Malaysia,
March 2018
3. Migrant workers: A forgotten economic muscle, G Vinod, Focus
Malaysia, 01/12/2020
