PETALING JAYA: As the nation slowly transitions into recovery mode post the movement control order (MCO), another forecast storm is brewing – unemployment.
There is a mounting pressure on the number of job losses as businesses struggle to see through the turbulent period even as the local economy gradually restarts.
The government anticipated this, which saw it rolling out the Employee Retention Programme (ERP) and Wage Subsidy Programme (WSP) in March and April, respectively, for companies to retain their workforce.
But at the rate that businesses are having their cash burnt more than they can generate, perhaps the most viable exit plan would be to exit the business for good and that would mean letting go of their workers as well.
The most recent case would be the upcoming closure of the Holiday Inn Resort in Penang by the end of the month. The hotel, which has been in business for over 40 years, has around 200 employees.
Based on the situation Malaysia is experiencing in the form of a low inflation now, premised on weaker demand and expectations of a contraction in the gross domestic product (GDP), the only direction that unemployment can go is up.
Malaysia faced an unprecedented drop in its working population as the number of unemployed individuals rose 48.8% year-on-year to 778,800, as compared to a 17.1% jump in March.
This brings the unemployment rate to 5%, up from 3.9% in March, breaching the full employment condition of below 4%.
The most affected employed persons were those in the manufacturing and services sectors.
AmBank Group chief economist and member of the Economic Action Council secretariat Anthony Dass (pic below) wrote in an economic report that the upward pressure on the number of job losses remained and much would depend on the ability of the businesses to weather the current unprecedented challenging time.
He expected the unemployment rate to hit 6% or higher this year, worse than during the 1997 Asian financial crisis and 2008 Great Recession when unemployment rose to 3.2% and 3.7%, respectively.
“The risk of companies going under remains high, apart from restructuring and engaging in mergers and acquisitions.
“Also, it remains unclear how the labour market will be when the WSP, which started in April, ends. It provided financial relief to employers who face revenue constraints and saved 2.2 million jobs, ” Dass said.
He said although government incentives aimed at retaining employees and the gradual reactivation of the economy following the conditional MCO and recovery MCO in May and June could ease some burden, it may take the weight off instantly considering an estimated 500,000 new entrants to the labour market this year.
With various bottlenecks in place such as the lack of demand, hiring new employees would be the last thing on the minds of most employers.
The Socio-Economic Research Centre executive director Lee Heng Guie said as the country emerged from the pandemic, it is expected that consumer demand and businesses would take some time to recover as revenue may not be restored back to pre-Covid levels just yet.
He expected the jobless rate to peak at 5.5% to 6.5% in the months ahead, reflecting the lag impact of the MCO and the struggling economic and business conditions amid the reopening of the economy early May.
“Businesses are concerned about 3Cs – cash flow, costs and credit – and also to stay afloat. Some of our workers will lose their jobs and some of these jobs will not even come back.
“Will we see more gig and freelancer jobs and remote work? Jobs for the future will be looking different in a new normal, ” he told StarBiz, adding that the rehiring would only begin when domestic economic and business conditions have stabilised and the broader economy is firm on its tracks for a solid and sustainable recovery, envisaged in the second half of 2021 and 2022.
Bank Islam chief economist Mohd Afzanizam Abdil Rashid (pic below) opined that the extension of the WSP by another three months should be a good starting point for companies to look into rehiring again as a strategic move.
“Certainly businesses would not want to lose out their footprint in their respective fields and industries.
“Every industry is highly competitive and companies would not want to be the late comer whenever the economy starts to pick up its pace again. So it’s a very fine line between being too pessimistic and fear of missing out, ” he said.
Besides all the adversities, Afzanizam said there were still pockets of job opportunities in certain sectors such as agrofood, which he stressed that the country should seriously look into.
“Malaysia has been a net food importer for quite some time. It makes sense for us to improve our self-sufficiency level in order to reduce our over-reliance on food import.
“Plus, it could be a key catalyst to create more jobs in the rural area. With the help of technology, modern farming can be a good business case for agrofood and could lure the young graduates to venture into this field, ” he added.
Lee said opportunities were present in technology-related sectors such as information technology (IT), data solutions and digitalised-technology driven sectors, other than in manufacturing (food processing, technology-related products, health products, energy and climate change), logistics and transportation, healthcare and education.
“It has been painful to watch the travel, tourism, hospitality and retailing sectors collapsing during the pandemic but as the most suffered casualties, they will eventually recover as people are returning to a more normal lifestyle and less wary about the health risks, ” he said.
MIDF Research in its economic review said the country’s unemployment rate is likely to stay high in the upcoming months as some companies are likely to retrench employees in order to reduce operating costs, particularly with new standard operating procedures in place and on expectations of lower revenue, moving forward, as consumer activities will take longer to fully resume.
It added that as the economy gradually opens and via various government measures through its stimulus packages, employment will be more stable in the second half this year.
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