Six years ago, the Covid-19 pandemic reshaped Malaysia’s economic structure and labour market in profound ways.
The health crisis drove unemployment to 4.5%, the highest level in nearly three decades, with 711,000 people losing their jobs, according to the Department of Statistics Malaysia (DoSM).
One of the most enduring scars has been persistent socioeconomic uncertainty, as many workers moved into the informal sector. While some have since found their way back into more stable employment, others continue to struggle, constrained by age, skills gaps and health conditions.
Just as these wounds were beginning to heal, they are at risk of reopening. This time, however, the trigger is not a health emergency but a geopolitical crisis, driven by world’s superpower.
Although the epicentre of the Middle East crisis, centred around the Strait of Hormuz, lies nearly 6,000km away, its tremors are already being felt here.
Data from Social Security Organisation (PERKESO)’s Employment Insurance System shows that job losses in the first four months of this year rose by 34.4% compared with 2025.
For now, employers are still absorbing rising operating costs by trimming profit margins, adjusting working hours, managing wage outflows and delaying difficult decisions, including layoffs. But such measures can only go so far.
If pressures persist into a second wave of the crisis, sectors that are highly sensitive to fuel price fluctuations, including mining, manufacturing, transportation, construction, agriculture, wholesale and retail trade, as well as food and accommodation services, will be affected.
In response, immediate containment measures have been rolled out through the Progressive Acceleration for Capability and Employment (PACE) initiative, backed by more than RM710mil in funding to strengthen human capital development and labour market stability.
This economic resilience package is further supported by labour market analytics from Human Resources Ministry (Kesuma) through PERKESO’s LMX Exchange, enabling early intervention before layoffs occur. The priority is to prevent affected workers from being displaced from the formal economy for prolonged periods.
With the right support, workers can leverage new skills and experience gained during transition periods to move from vulnerable sectors into more resilient industries.
While many may perceive that opportunities in Malaysia’s labour market are shrinking, the reality is that they are shifting.
However, this transition will only materialise if workers are willing to enhance their competitiveness through new skills and capabilities.
Another pathway, albeit a more challenging one, is the gig economy. As households adopt more cautious spending habits, demand for services such as food delivery, e-commerce and gig mobility may soften.
At the same time, rising fuel costs, vehicle maintenance and weaker demand are squeezing gig workers’ already thin income margins, placing their livelihoods at risk.
Unlike formal sector workers, many gig workers still face gaps in social protection, as they are not covered by benefits such as the Invalidity Scheme and the Employment Insurance System.
Looking ahead, reforms aimed at improving social protection for gig workers are being actively pursued, in order to narrow the widening gap between them and formal sector employees.
At this critical juncture, policy must move beyond simply stabilising prices and focus on strengthening livelihoods, with employment at its core.
Worker retention policies supported by targeted fiscal measures are needed to ensure employers do not resort prematurely to workforce reductions. Such measures must be implemented swiftly, as the World Bank’s commodity outlook suggests that the impact of the Middle East crisis will only begin to ease gradually towards the end of the year.
Policy emphasis must also be directed at strengthening the social protection safety net, particularly for gig workers and those in the informal sector.
Equally important is the need to bring back into the workforce individuals of working age, especially women who have had to step away from employment after childbirth due to rising living costs.
The Post-Maternity Leave Allowance, introduced through amendments to the Employment Insurance System Act 2017, is expected to help address this by supporting workforce participation and enhancing productivity, while safeguarding the socioeconomic well being of families.
From a public perspective, the situation in Malaysia may appear stable, as the government continues to cushion the impact of rising global oil prices through subsidies amounting to up to RM7bil a month. But calm waters can be deceptive.
In January alone, PERKESO recorded 10,568 job loss cases, the highest on record. Under a worst case scenario without timely intervention, job losses could return to levels seen during the pandemic six years ago.
This is not a moment for a wait-and-see approach. Every delay adds further strain on workers, families and employers who are already under pressure.
In embracing the theme “Pekerja Madani Kesuma Bangsa”, recognition must go beyond rhetoric and take the form of real protection, through a social security system that is resilient and responsive to evolving challenges.
We must ensure that the “safety net”, symbolised in PERKESO’s logo, has no gaps and is wide enough to serve as the final lifeline that buffers between resilience and collapse.
Datuk Seri Ramanan Ramakrishnan
Human Resources Minister
