Under Pemulih, the Government has further strengthened the automatic labour market stabilisers. Improvements were made to ensure the stabilisers were inclusive for all workers. – AZLINA ABDULLAH/The Star
PRIOR to the Government’s announcement of the National Recovery Plan which outlined the direction of the health sector recovery and the opening up of economic and social sectors, three indicators were used as thresholds for the next phase of transition.
They were the number of daily Covid-19 infections, the rate of beds used in ICU wards and the percentage of vaccination rate.
From a holistic view, these three indicators were unbalanced – directed only to health aspects without equal weight to economic indicators such as job losses and business closures.
When the movement control order (MCO) was tightened to curb the spread of Covid-19, the cost to the economy in terms of business and employment losses increased.
On the other hand, when the MCO was relaxed, the cost to the economy decreased.
Statistics of the past few weeks showed the rate of Covid-19 infection was more inelastic, while economic indicators pointed towards the opposite direction.
This situation called for the activation of automatic stabilisers in the system.
The Government’s initiative to introduce Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (Pemulih) on June 28, 2021, was timely for labour market stablisation.
Fiscal responses that were designed in Pemulih were comprehensive and inclusive. It addressed both perspectives of income and expenditure for households, and cash flow assistance and injection for businesses.
The primary objective of these fiscal responses is to cushion the impact resulting from the lockdown measures which have disrupted production and workforce.
In turn, this fiscal response contributed to the stabilisation of production, consumption and income.
Previously, the unemployment insurance scheme managed by the Social Security Organisation (Socso) was the most effective automatic stabiliser that provided income assistance to workers who lost jobs and placement services.
However, unemployment insurance on its own is insufficient to stabilise the labour market in response to the large-scale and unprecedented crisis induced by Covid-19.
The fact is that the number of insured workers do not fully reflect the size of workers impacted by lockdown measures.
In turn, the Government took an innovative and effective policy tool by introducing the temporary Wage Subsidy Programme (WSP), which was aimed to save jobs and help firms keep as many workers as possible on the payroll.
In 2020, WSP benefitted more than 3.7 million workers. Without WSP, unemployed workers in 2020 would have surpassed more than a million people and the unemployment rates were likely to reached double digits.
For the record, we were able to maintain the unemployment rate at 4.5% in 2020.
Under Pemulih, the Government has further strengthened the automatic labour market stabilisers. Improvements were made to ensure the stabilisers were inclusive for all workers.
Here at two examples of the improvement.
First, it has been proposed that WSP is eligible for all workers, including those earning more than RM4, 000 per month.
Eligible employers will receive a wage subsidy of RM600 per worker subject to a maximum of 500 workers per employer.
Removing the eligibility conditions reflects the market’s need because the size of workers impacted by lockdown measures was relatively higher for the professional, managerial, executive and technician (PMET) categories – essentially those who earn more than RM4,000.
Secondly, Pemulih partly improved the blind spot of economic stabilisers.
This crisis has shown some workers did not lose their jobs but experienced disruptions such as income loss, unpaid leave and allowance cut.
Pemulih proposed to provide income loss assistance of RM500, which is expected to benefit one million workers.
In addition to these examples, improvements were also made to the hiring incentive programme (PenjanaKerjaya 3.0) aimed to promote the creation of quality jobs and reduce unemployment among Malaysians.
For example, the minimum salary under the Malaysianisation programme is reduced from RM1,500 to RM1,200 to encourage local employment participation.
In conclusion, the labour market stabilisers are only temporary interventions to cushion the impacts of lockdown measures at the cost of fiscal expenses.
Gradually easing lockdown restrictions and allowing more economic activities to operate is the critical enabler to repair the damages and reduce fiscal dependency.
Assoc Prof Dr Mohd Yusof Saari is Chief Economist, EIS-UPMCS Centre for Future Labour Market Studies, Social Security Organisation (Socso)
