Academic journal article Journal of Southeast Asian Economies

Labour Policies and Institutions in the Eleventh Malaysia Plan: Aiming High, Falling Short

Academic journal article Journal of Southeast Asian Economies

Labour Policies and Institutions in the Eleventh Malaysia Plan: Aiming High, Falling Short

Article excerpt

1. Introduction

Malaysia's labour market institutions, policies and practices have largely trailed the nation's progress on other socioeconomic fronts. Labour policy has implicitly adopted supply-side approaches, leaning on skill acquisition, primarily through the education system and on-the-job training, to raise productivity and wages and transmit the benefits of economic growth to workers. Malaysia's laggard pace in developing labour market institutions and meeting global--even regional--norms and standards is demonstrated in its passage of minimum wage legislation only in 2012, later than most of its Southeast Asian neighbours--including lower income countries like Indonesia, Thailand, Philippines and Cambodia. In recent years, a host of other labour issues and deficiencies have flourished in public and policy discourses, which not only show that Malaysia remains some distance behind advanced economies, but also signal how its labour market structures may impede further progress.

Labour has been an integral component of Malaysia's development planning. From the 1970s through the 1990s, the five-year Malaysia Plans devoted attention to human resource development, recurrently in the context of population growth, sectoral shifts in employment and changes in the occupational profile of jobs. The emphases on workforce growth, education and skill development were undoubtedly timely and important, but policies omitted attention to changing forms and structures of employment--specifically, the rise of contract, informal, casual labour--and did little to redress low-skill migrant labour dependency, which was already flagged as a concern since the late 1990s.

Labour issues have been steadily covered in the past decade--but remain confined to a narrow framework. Official documents recognize the need for productivity to drive economic growth, and the ways in which persistent dependence on low-skill, low-wage migrant labour detracts from that objective. (1) However, solutions to perennial issues of upgrading skills and value-added are largely devolved to education and training programmes, with inadequate consideration of labour market structures that perpetuate transient and insecure work, and militate against skill development and technological upgrading.

This paper proceeds as follows. The next section surveys major structural features and policy challenges of Malaysia's labour markets and institutions, according to four themes: (1) productivity, skills and training; (2) wages, work conditions and social protection; (3) migrant labour management; and (4) labour participation, unemployment and fair employment. A brief overview of the Eleventh Malaysia Plan's three key strategies is then provided, which includes comments on overlaps and omissions vis-a-vis the four themes of this paper. This is followed by critical analyses of the 11MP, addressing its strengths and shortfalls. Given the subject's wide range, the discussion is rather broad-brushed, but strives to be specific and to make a contribution to the field, by pointing out major omissions of the 11MP and presenting alternative perspectives.

2. Structural Features and Policy Challenges

2.1 Productivity, Skills and Training

Malaysia has steadily cultivated a more skilled and academically qualified workforce, but low-wage and low-skill production persists. From 1980 to 2016, the share of employed population with tertiary education grew from 3.6 per cent to 27.5 per cent, alongside the share with secondary schooling (34.0 per cent to 55.2 per cent), while the share of those with primary schooling or less shrank from 62.4 per cent to 17.4 per cent. Although these changes correspond with an increase in skill level and broader diffusion of knowledge, the extent to which this labour supply progress translates into higher labour productivity depends on the quality of education. Malaysia's achievement in international standardized tests, a consistent and useful reference for basic academic performance over time, gives cause for concern. …

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