Automation is the way to go

ACCORDING to the “Key Statistics of Labour Force in Malaysia” report released in October by the Department of Statistics, Malaysia has a total workforce of 15 million, with another 7.1 million non-working people comprising housewives, students, retirees and those who are not interested in working. The remaining 3.3% unemployed working-class Malaysians comprise an estimated 740,000 people.

The Malaysian Employer Federation in 2017 reported that there are around 1.7 million foreign workers (excluding the unregistered ones) in Malaysia.

Analysing these clearly uneven numbers, it is unlikely that unemployed Malaysians would be able to substitute for foreign workers or replace their jobs any time soon. Based on these facts, I respectfully disagree with Human Resources Minister M. Kulasegaran’s effort to encourage industries to boost the salary scale of the “dangerous, difficult and dirty” jobs so that they would be lucrative enough for unemployed locals.

The lack of better-paying skilled jobs has left our unemployed graduates with no choice but to either seek opportunities in countries with higher currency values or to settle for unskilled jobs with salaries equivalent to foreign workers.

A recent study by Khazanah Research Institute made a startling revelation that many graduates, particularly those in part-time jobs, are willing to work below their reservation wage just to land a job. Another study by the Institute of Labour Market Information and Analysis in 2017 stated that 40% of the estimated 200,000 Malaysians working in Singapore are in mid- to low-skilled jobs, motivated mainly by higher wages.

The situation is dire. What is the cause and how do we solve it?

Looking back at the history, foreign workers were brought into the country in the 1970s to work on rural plantations and construction sites. However, the rapid industrialisation and economic growth of the country in the 1980s and 1990s drove a demand for labour with lower wages. This attracted both documented and undocumented foreign workers in large numbers.

Interestingly, despite the fact that these workers eased production pressures and demand for low- wage labour, the same scenario is now deterring companies to move up the value chain, which poses a disadvantage to the economy in the upcoming industrial revolution.

The ease and availability of low-wage foreign labour has created deep distortions that disincentivises industries to transform. Aligned with Vision 2025, the transition to a high-income economy requires a major shift from labour-intensive business models to those that are driven by knowledge-rich, highly skilled services, productivity gains, a technological edge and sophisticated technical know-how.

According to Economic Developments 2017, an annual report on the Malaysian economy by Bank Negara Malaysia, the foreign labour share of the workforce has trended downwards lately, from 18.8% in 2007 to 12% in 2017.

Although the change can be noted as an encouraging sign towards a better economic transformation, Malaysia’s m igrant population ratio is higher than that of our regional peers, and comprises an 8.8% share of total migrants to population.

Our economy’s dependency on low-skilled foreign labour is evident as only 5.2% of the total foreign workforce were tertiary educated.

Henceforth, the government should look into technological transformation in industry, such as automation, for a comprehensive solution to both the issues of dependency on foreign labour and unemployability of local graduates.

Firstly, the mindset has to change. Most industries are still engaged in a “race to the bottom” in relation to labour costs and are unwilling to pay more for technology despite the commensurable productivity gains it offers.

Council member of the Malaysian Employer Federation Datuk Seri Tan Thian Poh lately made a good suggestion: The government should set up an independent automation technology fund to assist industries to adopt such technology quickly. The foreign labour levy may be used to initiate it.

The substitute of labour for technology may, in turn, also create new skilled jobs for local graduates, with better wages, killing two birds with one stone.

Ultimately, the Malaysian economy has to progress from input-based, cost suppression as a source of competitive strength, to a dynamic economy based on a skilled workforce, technology-assisted and creating high value products.

This can be achieved by enacting well-aligned, coordinated and conducive government policies. These policies should focus on talent development, research and development, and industrial upgrading initiatives.


Skudai, Johor