Workforce Development in Malaysia

A Brief Overview of the Labor Landscape in this Dynamic Southeast Asian Country

Photo by Alex Block on Unsplash

A Historical Primer on Malaysia’s Plural Society

Rich in natural resources, the region was under foreign occupation by the Portuguese, Dutch, and British traders who were extracting rubber and tin, and expanding into palm oil production. With increased migration from Chinese and Indian workers, the population of the native Malays went from 90% in the early 1800s to around 50% by 1931.

Image via Tearra
Mean real household income by ethnic group. (Ravallion, 2019)

Malaysian Labor Dynamics in 2020

To reduce the volatility of its largely export-driven economy, Malaysia set its sights on Vision 2020, with the ambition to achieve the living standards of industrialized nations by 2020. Initiatives were introduced to move Malaysia towards a knowledge economy, industrial diversification, entrepreneurship and technology development.

Dependence on Foreign Labor

As Malaysia ramped up its manufacturing capabilities in the 1980s, especially in the electronics sector, it began to attract foreign workers from surrounding nations, such as Bangladesh, The Philippines, Cambodia, Laos, and Vietnam, in a process referred to as South-South migration. Workers were attracted by the availability of jobs, and the domestic manufacturing industry was motivated by the supply of cheap labor, enabling them to control costs.

(Athukorala & Devadason, 2012)
  1. Concerns about dangerous conditions and forced labor. Foreign workers frequently arrive in the country through recruiters, who can charge high fees, leaving newly arrived workers in debt with little recourse on the positions they are expected to work.

Mismatch between Education and Available Jobs

To raise wages and living standards, the Malaysian government has been investing heavily in its education system. Enrollment in primary and secondary education have become nearly universal, with gross enrollment in tertiary education up from 7% in 1990 to 40% in 2017.

(The World Bank, 2018)
  1. Youth unemployment. Half of Malaysia’s unemployed are aged 15–24, with 21% of unemployed age 25–29, with many concerned about ways to ease the school-to-work transition.
  2. Brain drain. It’s estimated that a third of the Malaysian diaspora living abroad has a tertiary education, but these talents are reluctant to repatriate, citing unsuitable remuneration and unsuitable opportunities in Malaysia.
  3. Growth in gig work. An increasing share of the workforce is now employed as a freelancer or gig worker. In a survey of e-hailing drivers, the majority cited that they could not find another stable job, regardless of their education level.

What’s Next for Malaysia

I’ve barely scratched the surface on the economic development of Malaysia. But by starting to understand the dynamics of its institutions and challenges of its workforce development, we have a better foundation to understand the region and how the future of work will evolve.

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