Labour force and wage comparisons by numbers

The labour force refers to those who, during the survey, are between the ages of 15 and 64 (in completed years at last birthday) and are either employed or unemployed 1. In conjunction with the International Labour Day on May 1, we examine a number of dynamics concerning the labour force in Malaysia and Penang over the past year. Additionally, we also observed wage comparisons among Asean and leading global economies.

Malaysia’s labour force

The labour force participation rate (LFPR) is defined as the ratio of the labour force to the working age population (15 to 64 years), expressed as percentage 2. Over the period of December 2014-January 2015 Malaysia’s LFPR rate declined by 0.7 percentage point from 67.9% to 67.2% (Table 1). According to the Department of Statistics, this decline was due to a reduction of population aged 20 to 34 in the labour market.

One potential reason for the decline is that students who worked part-time during the December holidays often resume their studies in January following the start of term. This concurs with the rise in the number of people outside the labour force who totalled slightly more than 6.8 million at the start of 2015. Meanwhile, year-on-year comparison exhibited that the LFPR was lower by 0.6 percentage point as compared to 67.8% in January 2014. Throughout last year Malaysian workers observed a consistent LFPR fluctuating between a high of 68% and a low of slightly below 67%.

  • [1] Manual on concepts and methods: Surveys of economically active population, employment, unemployment and underemployment, International Labour Organization (ILO).
  • [2] Ibid.

The first 10 months of 2014 exhibited a downward trend in the unemployment rate before it increased steeply in the fourth quarter. At the start of 2015, it continued to rise by 0.1 percentage point to 3.1% from 3.0% in December 2014. It is noteworthy that the unemployment rate for the current month recorded a slightly lower rate compared to January 2014 by 3.3%. Taking into consideration the major religious festivals such as Hari Raya Aidilfitri, Chinese New Year and Deepavali, the seasonally adjusted unemployment rate was generally lower except on two occasions: May-June and September-November.

Penang’s labour force

The most recent data show Penang boasts a healthy labour force of just over 800,000. The unemployment rate has periodically fluctuated over the past five years but overall displays a downward trend. For Q4 of 2014, the unemployment rate was half the national unemployment rate at 1.5% – the lowest point in five years. However, this still translates to an estimated 12,000 people actively seeking jobs in that quarter. Significantly, Penang’s labour force has one of the most equal gender participation ratios, at close to two females for every three male employees 3.

The majority of Penang’s employed labour force consists of secondary school leavers. University graduates make up the next largest proportion consisting 28.5%, followed by 11.5% with primary education as their highest qualification. In line with the goal of becoming an intelligent city, the Penang state government set up the RM20mil Penang Future Foundation Fund in April. Such initiatives are two-pronged, primarily to help make tertiary education more accessible but also to stem the brain drain by retaining local talents within Penang. It is hoped that the labour force will mature to one based on high value-added skills with a greater population of better qualified and skilled labour.

[3] Labour Force Survey 2013, Department of Statistics Malaysia.

The employment breakdown reflects the educational attainment of the state’s labour force. The number of university graduates is roughly in equal proportion to the number of technicians and associate professionals, professionals, and legislators and senior managers at 28.5%. One reason for the lower number of people working in these sectors could be attributed to brain drain; it is estimated that 64% of Malaysia’s brain drain is concentrated in these three sectors as stated by the World Bank Bilateral Matrix.

Penang’s role as a net manufacturing exporter has also led to occupations in plant and machine operations. At 14.7%, the percentage is slightly less than expected due to the inclusion of foreign labour. Nonetheless it still remains the next most popular category of occupation after occupations in the service, shop and market sales industry.

Wage comparison

The median monthly income for Penang is equal to that of Malaysia, at US$472.5. Similarly, both are approximately 6.2 times lower than the median of Singapore at US$2,945. However, when considering Malaysia’s average monthly wages in comparison with that of Singapore, the figures are 4.6 times lower. The difference between the median and the mean monthly income for Singapore is smaller than that of Malaysia, alluding that top income earners heavily distort upwards the figure for Malaysia’s mean monthly income.

Although Malaysia’s mean monthly wages remain higher than Indonesia and Thailand – the two largest economies in the Asean region – it still lags far behind the likes of more advanced economies such as the US (US$3,326) and the UK (US$3,411), as well as once-contemporary economies such as Taiwan (US$1,538) and South Korea (US$2,310).

In 2013 Malaysia joined a league of countries implementing a minimum wage of RM 900 a month in Peninsular Malaysia and RM 800 in Sabah and Sarawak. The minimum wage does not include payment by way of commissions, subsistence allowance and overtime payment4. As of January 31 this year 42,297 statutory inspections were conducted by the Labour Department, with 587 (or one per cent of employers) discovered to have not been abiding by the minimum wage ruling 5.

While the rate is less than half of both the national mean and median incomes, it is comparable to the level set by China and other developing countries in Asean. In accordance with the Minimum Wage Order 2012 the minimum wage is to be reviewed bi-annually. The most recent review conducted by the National Wage Consultative Council, which takes into account the rising cost of living faced by the people at present, is currently awaiting the cabinet’s approval 6.

Historically, employment status has had a strong gender dimension with men currently wielding 63% of all wage jobs across Asia and the Pacific. The International Labour Organization (ILO) has identified two major factors contributing towards this phenomenon. First, women are less likely to enter the labour market compared to men. Second, when women become economically active, they are more likely to be in self-employment and are often excluded from access to wage jobs.

In cases where women are in wage employment, a strong concern is that they often receive less pay than their male counterparts. On average, women’s monthly average wages are lower compared to men’s, irrespective of whether the economy is developed or developing. Nevertheless, from the data presently available, Malaysia has one of the most equal gender pay gaps in Asia, behind Thailand and Timor-Leste. The gap in favour of men is opined by the ILO to be partly due to the differences in the number of hours worked. Given that women have a greater tendency to work part-time (often due to childcare duties), this has negative effects on their monthly take-home pay. However, the gender pay gap also showcases disparities in wage rates. These can in part be traced to differences in observable characteristics like education or experience, and partly reflect discrimination in the labour market 7.

  • [4] Guidelines on the Implementation of the Minimum Wages Order 2012, National Wages Consultative Council.
  • [5] Bernama, March 25, 2015.
  • [6] Ibid.
  • [7] Chapter 10 ILO: Global Wage Report 2014/15, ILO.

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