Labour crunch: A fresh fruit bunch harvestor at an oil palm plantation in Penang. It is time for the people to understand that many of the low entry level jobs support the high value chain.
MALAYSIA is trying to reduce its dependency on low-skilled foreign workers as it moves up the economic value chain.
To reduce the number of foreign low-skilled workers, both the businesses and industries across all the economic sectors are asked to hire more locals and embrace automation with the aim of becoming a high-income nation.
And interestingly they have been doing so, where local employees have become the first choice.
Still, businesses and industries across all the economic sectors need low-skilled foreigners to fill up the many jobs available where the locals are reluctant to take on.
Most of the jobs taken up by the foreign workers are low entry levels considered to be dirty, dangerous, and difficult or 3D – reasons as to why the locals shy away.
Also, the locals are seeking a more balanced lifestyle, better paying jobs like work in the gig economy or going abroad for the same low entry level jobs.
Today, the labour shortage issues have worsened, now estimated foreign workers at 1.17 million in 2021 (registered workers) after the country froze the hiring of foreign workers in the past two years to stem the spread of Covid-19, down from close to two million before the pandemic.
It has created an acute labour shortage and certainly weighed on businesses and industries operating capacity as well as operating costs that lead to loss of billions of dollars in revenue to the economy from the border opening, the move to endemic from the pandemic and the government’s requirement on the need to establish that the locals refuse the jobs first before allowing for the foreign workers which is tough.
This has caught businesses and industries across all the economic sectors in “Catch 22” situation.
While trying to incentivise the locals to work, they are at the same time facing strong challenges to retain them due to the issue of 3D and are not keen to get themselves employed at “entry-level” jobs.
On the ground, employers are extremely frustrated for not being able to engage the necessary workers as locals still shun the work performed by foreign workers. It is not just about raising the salary, but it is more of the preferences of the locals.
It appears that no matter what kind of upskilling and reskilling is being introduced, the locals are less likely to do the low entry levels of work. This explains why our youth (15 to 24 years old) unemployment rate is high at 11.1% at the end March 2022.
With the chronic shortage of foreign workers prolonging, a new challenge has emerged.
It is the “pinching” of foreign workers, something that used to be common with locals at all levels of the organisation structure.
Companies are now offering a higher pay to current foreign workers, by giving more than RM100 a day.
Many foreign workers have switched companies although this is against the law and makes them illegal immediately.
But the new employer is willing to recalibrate the foreign worker’s status and make it legal again.
Today, proponents of foreign labour argue that it makes sense to pinch in order to address the immediate issue at hand. But this does not solve the problem.
The net impact to the economy is still that it hampers business growth and economic recovery.
Yet, there will also be another group who would argue whether the country’s aspirations to move up the value chain and reduce the reliance on low-skilled foreign labour will be realised should hiring resume to what it was before.
The two-year pandemic would be a “wasted opportunity” if the country were to revert to the use of foreign workers without considering plans to upgrade, adopt new technology and automate those processes that are performed by low-skilled foreign workers.
While both are right in this case, what is needed now is to have a short-term remedy while working on the medium and long-term plan.
The policies and plans need to be well constructed and not “flip-flop”.
In doing so, we must remember that businesses are already embarking on automation and technology.
What is it that they need further to accelerate their automation and technology? If there is a need to hand-hold them, then it must be done until such time.
On the immediate scenario, without workers the country cannot optimise on its output and export simply because businesses and industries are unable to do so.
This will affect our position as a leading exporting nation in the world.
This may lead to businesses and industries including the locally owned to relocate their operations and factories elsewhere.
It is time for us to understand that many of the low entry level jobs support the high value chain.
And we must also remember that the locals are unlikely to take up these jobs.
On that note, it will be difficult to automate and adopt technology in every aspect of the business activities today across the board.
This means that we will still need foreign workers to support the low entry levels that will support the high value chain and the economic sectors across the board.
We cannot have a “one fit” policy across the board to address the workers issues simply because this is a complex matter.
What we really need to do is to deep dive into sectoral and industry specific on the dependency of foreign labour.
Strong engagement is needed especially with the micro, small and medium enterprises (MSMEs)to understand their issues and challenges and the supply chain complexity.
Upon understanding the complexity of the workers’ issues can we set targets that are agreed up by the individual business association and industries on how to reduce the dependency of foreign workers and how to automate and adopt technology.
At the moment, many in the segment of MSMEs are still in the dark and are hurt from the current “one fit all policy”
The acute shortage of workers requires an immediate and quick resolution to support the immediate economic recovery where all single economic sectors are being hurt directly and causing indirect impacts on other lines of businesses.
Businesses are reluctant to take new orders as they are struggling to meet the current orders.
It is now critical for the government to finalise the mechanisms to bring in the required number of foreign workers to fill up the vacancies in jobs shunned by locals immediately as the country is losing billions of dollars.
Every day we delay this issue is causing significant revenue loss to the government.
Modernisation, upskilling, reskilling, and talent development are important as a medium-term strategy.
Anthony Dass is chief economist/head of AmBank Research, member of the economic action council secretariat and adjunct professor of UNITAR Malaysia. The views expressed here are the writer’s own.
