WHILE Malaysia is facing the challenge of a looming global economic crisis, it may be worthwhile to pause and consider the efforts and initiatives that have been put in place to ensure our nation successfully gets back on its feet as quickly as possible.
Sure, you might be feeling the pinch of the rising cost of living which has been progressively gaining a chokehold on many Malaysians – suppressing household disposable incomes.
No doubt, many of us have had conversations with our neighbours and friends about how our grocery and food bills seem to have shot up over the last year, and we may be nervous as to what the future holds.
Rising concerns
As two-thirds of household income comes from paid salaries, the spike in living costs has, in fact, put the brakes on consumption expenditure and impeded demand-side growth, according to Assoc Prof Dr Mohd Yusof Saari, chief economist at the collaborative research laboratory Centre for Future Labour Market Studies based in Putrajaya.
This can be measured by the Consumer Price Index (CPI) for food and non-alcoholic beverages which has risen steeply by over 4% since March.
Although things are not as bad as they once were, with the unemployment rate having decreased from 4.2% in January to 3.7% in July this year – the lowest it has been since February 2020 – the rates are still higher than pre-pandemic crisis levels, as in 2019 unemployment was at 3.3%.
“Thus, the increase in food and drink prices would have definitely had an impact on household income, especially for the B40 and lower M40 groups,” says Dr Mohd Yusof.
So naturally, people are anxious. Last year’s Budget 2022 had in fact allocated over RM31bil for subsidies, aid and incentives to minimise the impact of the rising cost of living by means of price controls on goods and services. However, several unforeseen circumstances put paid to these plans.
For example, Budget 2022 tabled in September last year did not anticipate the accelerated cost of living due to the Ukraine-Russia conflict.
The global economy was significantly weakened by this war because of significant disruptions in trade, as well as food and fuel price shocks – all of which contributed to global inflation.
In addition, there were further disruptions to the global supply chain due to China’s zero Covid-19 policy and stringent lockdowns, as well as the US Federal Reserve’s tight monetary policy.
Dr Mohd Yusof says that the Government’s efforts to cushion the impact of these uncertainties resulted in an increase in the total amount of subsidies from the initial RM31bil to RM77.3bil.
With the recent tabling of Budget 2023, however, the Government has made concerted efforts to further improve labour market conditions.
Nonetheless, questions have arisen as to whether Budget 2023 is an “election budget” and if it adequately addresses the economic needs of the country and the people.
Focus on labour
According to Dr Mohd Yusof, the paper Labour Market Outlook 2023: Dovetailing Post-Pandemic Recovering Momentum With Enhanced Resilience And Reforms recently published by the Centre for Future Labour Market Studies (EU-ERA) suggests that the policies and initiatives embodied in Budget 2023 should be continued, and improved when necessary.
“There are two important aspects of Budget 2023 that are significant for the Malaysian labour market,” he says.
“First, Budget 2023 allocates at least RM99.7bil to cover the labour market ecosystem from end-to-end – encompassing labour supply, the job market and labour demand.
“And second, policies and initiatives included in Budget 2023 support the 12th Malaysia Plan.”
The recent Budget is expected to enhance labour supply through empowering focus groups such as B40, M40, women and youth, with RM18.6 bil.
In addition, the labour demand component is focused on creating jobs for the people through direct and indirect measures that are worth at least around RM80.9bil.
Finally, measures to strengthen the job market and boost employment are set to cost around RM208mil.
Crucial interventions
As part of the key measures to strengthen the labour market, crucial interventions need to be taken, including a multi-dimensional approach to incentivise people to work and realign workforce skills and proficiencies to meet industry demands.
“Youth unemployment, graduate employability, worker protection and talent development are all addressed in this year’s budget,” says Dr Mohd Yusof.
“And they leverage on high technology and digital-based growth which will then further reinforce a highly-skilled workforce and better living standards.”
In Budget 2023, a significant allocation has been given to spur high quality investments in strategic sectors, creating high-skilled jobs, and incentivising digitisation and automation.
“Micro, small and medium enterprises (MSMEs) are encouraged to move up the value chain by innovating and producing high quality products and services. These measures are important to create ‘real’ jobs for Malaysians,” according to Dr Mohd Yusof.
“Job creation can be then be further optimised through inclusive hiring and improved job matching mechanisms.”
Due to the pandemic, many economic sectors have suffered a great labour shortage. For this reason, an inclusive intervention must be implemented to maximise filling up vacancies with local talents.
A prime example of this is how hiring incentives under Perkeso have encouraged employers to provide job opportunities for women, disabled persons, the orang asli community and ex-convicts, closing the inequality gap.
Improving job matching mechanisms is also important to reduce job search friction.
In Budget 2023, the setting up of public employment service provider MYFutureJobs satellite centres across the country as well as the National Placement Centre initiative (a one-stop employment centre) have been imperative in increasing the community’s access to job opportunities nationwide, and to assist job seekers finding relevant work.
Inclusive initiatives
The policies and initiatives in Budget 2023 have been carefully targeted at supporting the 12th Malaysia Plan, whose objective is towards a “prosperous, inclusive, sustainable Malaysia”.
“In a nutshell, our assessment indicates that Budget 2023 covers vital aspects for labour market empowerment strategies aligned with the 12th Malaysia Plan,” explains Dr Mohd Yusof.
“For example, allocation of RM235mil in funds to encourage more women to increase their business capacity and improve marketing strategies under the Semarak-Nita BSN Scheme, Tekunita TEKUN, DanaNita MARA and Biz Lady Bank Rakyat.
“These initiatives are expected to increase women’s participation in the labour market, and directly support the policy direction of developing future talent.”
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