Creating Modern Jobs in Malaysia
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Transcript of Creating Modern Jobs in Malaysia
MIER National Economic Outlook Conference 2012
2
Modern jobs for the high-income economy
High paying jobs are skill-intensive jobs
Flexible labor markets
Unlocking Women’s Potential
Outline
Traditional vs. Modern
Source: World Bank.
Traditional Modern Simple, routine and standardized tasks Complex, analytical and differentiated tasks High supply of low-skill labor that can perform the tasks à low wages
Tight supply of specialized labor and higher productivity à High wages
Most jobs in agriculture, labor-intensive manufacturing
Most jobs in knowledge intensive tasks across all economic sectors
Strict labor regulations make it difficult to hire and fire workers, effectively placing the burden of providing income security on firms at the cost of lower efficiency
Flexible labor regulations reduce the cost of hiring and firing and increase efficiency, while effective social safety nets protect workers
Rigid job structures and expectations that are not conducive to the participation of large segments of the population, especially women
Jobs that leverage on the entire stock of human capital by making it easier and more attractive for women to join the labor force
Competitiveness derived from institutions, security of investments
Competitiveness derived from the quality of human capital, in addition to good institutions
Employment grew at the same pace as the labor force, keeping unemployment low
Index, 1982=100
Source: DOS – Labor Force Survey Time Series Data, 1982-2010.
80
105
130
155
180
205
Employment (1982=100)
Labor Force (1982=100)
Labor markets have tightened recently Unemployment rate (left axis); Labor Force Participation Rate (right axis)
Source: Department of Statistics, Malaysia.
61
62
63
64
65
66
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Unemployment Labor force participation rate
The share of the labor force with tertiary education increased Labor force by level of education, percent
Source: DOS – Labor Force Survey Time Series Data, 1982-2010
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
Tertiary
Secondary
Primary
No formal education
7.3 pct CAGR
Most jobs created in the past decade have been high- or mid-skill Net jobs created between 2000 and 2010, thousands
Source: DOS – Labor Force Survey Time Series Data, 2000, 2010. Note: See full report for explanation of skill levels.
910 826
37 0
100 200 300 400 500 600 700 800 900
1,000
High Skill Mid-skill Low-skill
But “stock” of jobs still mostly low-skilled Number of jobs in 2010, thousands
Source: DOS – Labor Force Survey Time Series Data, 2010. Note: See full report for explanation of skill levels.
Skilled agricultural and fishery workers
Craft and related trade workers
Plant and machine-operators and assemblers
Elementary occupations
3,188 3,007
4,934
0
1,000
2,000
3,000
4,000
5,000
6,000
High Skill Mid-skill Low-skill
Malaysia is still seen as a low-skill, low-wage investment destination Index, max=10
Source: A.T. Kearney and World Bank staff calculations. Malaysia
Malaysia
Malaysia
India
India
India
China
China
China
ASEAN*
ASEAN*
ASEAN*
Singapore
Singapore
Singapore
USA
USA
USA
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
Compensation
Business Environment
Exp. & Education
Enrollment rates still lag advanced economies Gross tertiary enrollment, percent
Source: World Bank EdStats. 0
20
40
60
80
100
120 19
90
1991
19
92
1993
19
94
1995
19
96
1997
19
98
1999
20
00
2001
20
02
2003
20
04
2005
20
06
2007
20
08
2009
Asean Median China
Malaysia Thailand
OECD Median Korea
The share of the labor force with tertiary education is middling… Share of the labor force with tertiary education
Source: World Bank EdStats.
0
5
10
15
20
25
30
35
40
… as are test scores, although regional differences are important PISA Scores
Source: OECD.
350
400
450
500
550
600 OECD-Science OECD-Math OECD-Reading Science Math Reading
Non-routine “soft” skills are required for modern jobs
Source: Acemoglu and Autor (2010).
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Skills for “modern” jobs
Upskilling labor force to perform non-routine skills within existing jobs – agriculture, manufacturing, police…
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Malaysia’s schools have limited autonomy compared to Korean peers School autonomy at lower secondary – TALIS 23-country study
Source: OECD (2009, Table 2.7) and World Bank staff calculations.
Malasia23 Country Rank
Malaysia Korea Talis Average of 23
1 Selecting Teachers 6.9 31.2 67.7 232 Firing Teachers 6.8 20.8 60.7 233 Establish Teacher Salaries 4.0 5.7 24.3 184 Determine Salary Increases 11.4 3.5 25.6 155 Professional Development 33.8 63.2 60.3 176 Formulate School Budget 68.8 77.3 75.3 177 Allocations within budget 62.5 94.9 88.2 218 Discipline Policies 56.7 56.7 93.1 239 Assessment Policies 21.6 91.1 88.9 23
10 Admission Policies 21.6 85.8 85.0 2311 Course Offering 35.4 88.7 72.2 2212 Course Content 33.3 85.4 65.7 2013 Choosing Textbooks 19.0 96.7 90.0 23
Average 29.4 61.6 69.0 20.6
Firms generally identify non-routine and other soft skills as a key constraint Percent of firms reporting skill as a constraint
Source: Productivity and Investment Climate Survey, 2009.
10 14
18 22 23 24 25
28 30
37 46 48
0 10 20 30 40 50
Teamworking Social
Adaptability Leadership
Time management Numerical
Problem solving Technical/professional
Creativity/innovation Communication
English language Information technology
The number of foreign workers quintupled between 1999 and 2008 Registered foreign workers, thousands
Source: EPU
410
807 850 1,068
1,470
1,869 2,063
1,803
0
500
1,000
1,500
2,000
2,500
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Migrant workers partly replaced young Malaysians who went to university Participation in the labor force, percent
Source: EPU, CEIC. 4
8 8 10 12 12 15 15 16 16 14 14
24 23 22 21 22 21 20 20 19 19 18 18
0
5
10
15
20
25
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Share of Foreign Workers in LF Share of 15-24 Year-Olds in LF
Can be helpful to correct market distortions if well-implemented possible supervision-wage trade-off and increase in labor force
participation can outweigh unemployment effects at appropriate level No panacea:
productivity growth key to sustained wage increases not the best tool to address poverty, inequality, industrial upgrading
Implementation is key predictable, evidence-based revision process rigorous monitoring and impact evaluation
What is the role of a minimum wage?
Migration inflows respond to demand-pull forces concentrate on addressing underlying factors for demand for low-
skilled labors by firms in some instances high foreign worker inflows reflect positive
developments à more young men in university
Additional options to increase the numbers of high-skilled migrants
tap into foreign students already in Malaysia improve livability of cities
Should there be a restriction in the number of foreign workers?
Sustainable path to higher wages is through greater productivity linked to higher levels of skills
Structural reforms to ensure sustained demand for skills more skills necessary but not sufficient for firms to upgrade
Towards more and better skills: targeting underserved groups and areas can yield quickest gains private sector involvement in skills provision curriculum reform emphasizing soft skills more autonomy and accountability for schools
Higher wages through more and better skills
Labor regulations generally flexible, but not uniformly WEF rankings
Source: World Economic Forum.
15 28
19 30 104
4
Cooperation in labor-employer
relations
Flexibility of wage
determination
Rigidity of employment
index
Hiring and firing practices
Redundancy costs, weeks of
salary
Pay and Productivity
Labor regulations generally flexible, but not uniformly Termination benefits, weeks of pay
Source: Doing Business.
Labor regulations generally flexible, but not uniformly Legally mandated notice period for redundancy dismissal, weeks
Source: Doing Business.
High levels of job protection a sensible strategy for lower-income countries
low capacity of government to tax and administer social insurance Malaysia can achieve a better balance between job flexibility and worker protection
ease regulations on retrenchment implement unemployment insurance as part of broader safety net
Package of reforms: job flexibility without worker protection socially unsustainable
Protecting workers rather than jobs
Gender equality is the right thing to do – and smart economics Gender gaps in… …lead to
Education
• Reduced human capital stock in the economy • Employment segregation by sector and occupation
Home vs. Market work • Underutilization of human capital and talent
Sectors and occupations
• Distorted allocation of talent (especially managerial talent) • Earnings gaps, which discourage women from entering the
labor market, reduce savings for old-age and spending on children
MYS
10
20
30
40
50
60
70
80
90
100
4 5 6 7 8 9 10 11
Malaysia’s women’s labor force participation is low Female labor force participation rate, percent
GDP per capita, logs
Source: World Development Indicators, World Bank staff calculations
Over 500,000 “absent women” could be contributing to the economy
Source: World Bank staff calculations
Estimated FLFP (%) "Absent Women"
Regression (all countries) 52.3 504,169
Same level as Indonesia 53.2 576,419
Regression (excl. MENA) 57.0 896,881
Same level as Singapore 62.9 1,386,748
Same level as UK 69.3 1,921,397
Same level as Canada 74.2 2,330,738
4
8
16
0
2
4
6
8
10
12
14
16
18
Korea (FLFP=55%) Singapore (FLFP=60%) Sweden (FLFP=76%)
Significant gains from closing gender gaps Potential gains in GDP per capita from raising FLFP to the levels of different countries, percent
Source: World Development Indicators, World Bank staff calculations
0
10
20
30
40
50
60
70
80
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Japan (2008) Korea (2007) Malaysia (2010)
Malaysia’s participation profile is single-peaked Participation rate, percent
Source: ILO Laborsta, CEIC
42
53
68
50
57
66
74
82 86
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1960s 1970s 1980s
Korea Malaysia Singapore
Women’s participation has increased with new generations, but gaps remain Labor force participation of women 25-29, by birth cohort, percent
Source: ILO Laborsta, CEIC
Education levels affect FLFP: 70% of women with higher education work
Labor force participation of women by educational level and age, percent
Source: Department of Statistics, Labour Force Survey, 2010
30%
40%
50%
60%
70%
80%
90%
100%
20-29 30-39 40-49 50- 55
no certificate/not applicable
primary
secondary
post-secondary
tertiary
Women’s gross enrolment in secondary education, percent Higher secondary enrolment will help
Source: UNESCO Institute for Statistics
71 77 79 80 81 83
88
96 96
50 55 60 65 70 75 80 85 90 95
100
Married women are less likely to work
Labor force participation of women by marital status, percent
Source: Department of Statistics, Labour Force Survey, 2010
82.4
97.3 88.0 91.7
69.5
48.9 57.1
78.4
0 10 20 30 40 50 60 70 80 90
100
Never married Married Widowed Divorced, separated
Male, (age 20-55)
Female, (age 20-55)
…housework is the main factor for women being out of the workforce
Reasons for not seeking work
Source: Labour Force Survey
Women Men Housework
Schooling
Going for further studies
Increase secondary education enrollment
Flexible job arrangements part-time work, flexible working hours, telecommuting
Better child care increase the number of registered child care centers allow for deduction of child care expenses from income
Men as a source of child care
What needs to be done to increase women’s participation in the labor force?
The Malaysia Economic Monitor is available for
download at
www.worldbank.org/my