Article: Labour Shortage In The Malaysian Workforce In The Covid-19 Pandemic Era

Introduction 

Introduction

 

Labour shortage is a global issue today (Cassang, 2020). According to a study by Knott (2020), employers and governments commonly define shortages as the presence of specific attributes of the labour supply that hinder capital proliferation rather than the absence of individuals ready and able to perform (Sharma, 2006; Sassen, 1988).

 

Nonetheless, labour markets are experiencing a cyclical change and encountering a structural revolution. This is due to globalisation, shifts in labour market structures, and demographic trends as well as rapid adoption of technology following the COVID-19 pandemic (Brunello
& Wruuck, 2021). The long-term decline in labour force development and consequences of the outbreak (e.g., physical distancing, staff absence and compliance with national lockdown regulations) have contributed to notable labour shortages (Westerlind et al., 2021; Nagurney, 2021).

 

In addition, the labour shortage has become a significant impediment to industries’ sustainability and development (Sulaiman, Ismail, Saukani & Lelchumanan, 2021). Thus, this article aims to discuss the labour shortage in Malaysia, as the shortages are a significant obstacle to the nation’s economic growth and development (Knott, 2020).

 

 

Labour Shortage from the Global Perspective

 

Generally, a labour shortage arises when there is not enough available workers participating in the market to fulfil employeers’ demands. The prolonged labour scarcity hinders companies’ growth and may also adversely affect society (Randstad, 2022). As businesses reopen after the nationwide lockdown, various countries have reported that employers cannot find employees to fill roles in their organisations.

 

For instance, in early 2022, European employers struggled to fill more than 1.2 million vacancies, while employers in Australia worked harder to fill almost 400,000 positions (https://www.randstad.com/workforce-insights/talent-acquisition/why-there-a-global-labor-shortage/, 2022).

 

In addition, over the past year, the Canadian economy lost nearly $13 billion in value due to nationwide labour and skills shortage, particularly in the manufacturing sector (Saba, 2022; https://globalnews.ca/news/9224124/canada-labour-shortage-economy-loss, 2022).

 

Therefore, the labour shortage is a global issue faced by most nations in the contemporary era.

 

 

The Reality of the Labour Shortage Issue in
Malaysia

 

Malaysia is recovering from the COVID-19 pandemic and entering the endemic phase. Nevertheless, shortages are noticeable in sectors that contribute significantly to the nation’s Gross Domestic Product (GDP). Although Malaysia has eased up the Movement Control Order (MCO) and enabled greater mobility at work, the nation is still experiencing a shortage of at least 1.2 million workers, especially in crucial economic sectors such as manufacturing, plantation and construction (Reuters, 2022; Lim, 2021; Malaymail, 2021).

 

Furthermore, from palm oil plantations to semiconductor makers, businesses in Malaysia are rejecting business orders and withholding billions in sales due to not having enough employees to fulfil these client requests. Thus, a shortage of over a one million employees can jeopardise the nation’s economic recovery (StarNews, 2021).

 

In addition, Malaysians’ hesitation in engaging in the 3D jobs (dirty, dangerous and difficult) within manufacturing, plantation, construction and cleaning has urged businesses to search abroad for workers (Wong, 2022). For instance, the palm oil sector, which highly relies on migrant labour, has been severely impacted by the halt in the entry of foreign workers due to movement restrictions during the COVID-19 outbreak (Wong, 2022). Furthermore, according to the Minister of Plantation Industries and Commodities, Malaysia’s palm oil industry witnessed a loss of RM10.46 billion in the first five months of 2022 due to labour shortage (Gunasegaram, 2022; Ong, 2022).

 

The Malaysian government has put more effort into bringing foreign workers from other countries, such as Bangladesh and Indonesia, to bridge the labour gap (Parasuraman, 2022). However, some issues, such as less flexibility and an unsatisfactory work environment, have adversely impacted local interest towards these sectors. Hence, these issues have to be addressed by the government, employers and trade unions by finding appropriate strategies to attract locals and reducing the reliance on recruiting foreign workers.

 

Nonetheless, the government has taken some actions to resolve these challenges, such as by introducing PLWS and the Amendment to the Employment Act, which took effect in January 2023.

 

Job Expectations, Skills Mismatch and Labour Shortage

 

In general, structural unemployment, also known as labour mismatch, points out the inadequate allocation of resources between supply and demand in the labour market. This can be characterised by educational or skills, geographical or regional, as well as occupational and industrial mismatches (Sahin et al., 2014; Adams et al., 2000), leading to poorer prospects and lower earnings (Steed, 2018).

 

Moreover, the lack of soft skills (e.g., communication, competence in multiple languages and IT knowledge) could also cause a mismatch between job expectations and availability (Parasuraman, 2022). It was further claimed that the mismatch issue is caused by supply and demand, mainly due to the low level of labour force credentials and a sectoral domain in low-tech and low-skill-intensive sectors (Pastore, 2019; Adda et al., 2017; Franzini & Raitano, 2012).

 

As cited by Somers, Cabus, Groot & Brink (2018), a strong match between supply and demand of labour is essential for workers, especially graduates, as well as organisations and, subsequently, the nation’s economy. Parasuraman (2022) stated that employers must provide opportunities for workers, including graduates, to perform rather than expecting competence from the very beginning. In addition, the organisational goals could be attainable with proper training, coaching and mentoring.

 

Accordingly, the Productivity Linked Wage System (PLWS), a flexible and competitive wage system that allocates wealth created based on the employer’s and employee’s performance, can be one of the strategies employers implement. This solution can enhance productivity and establish a strong match between jobs expectation and skills (Parasuraman, 2022).

 

Fortunately, Human Resource Development Corp and Social Security Organisation (SOCSO) have established various reskilling and upskilling programmes in response to the mismatch in jobs expectation (Chau, 2022). These programmes enable upskilling and reskilling of workers by bringing a different skill level to improve knowledge and experience and lessen the labour shortage. It is highly crucial to address the mismatch skills due to the following factors:

   

Table 1.0: Impact of Skill Mismatch on Individuals,
Company and Nation

 

Individual Level	–         Severe wage penalties –         Adverse impact on job and life satisfaction.
Company Level	–         Adverse effects on productivity and competitiveness, impacting the capability to introduce new products, services or technologies. –         Higher turnover rate –         Loss of profits
Country and Regional   Level	–         An increase in unemployment affects competitiveness and attractiveness to investors. –         Lost opportunities to reform, implement productive transformation and job creation.

Source: ILO, 2020

 

Moreover, various reasons can cause labour
shortage, such as follows:

 

Ø  Distinctions in skills and qualifications restrict the extent to which workers smoothly transform into
high-demand industries, leading to a mismatch of labour supply and demand.

Ø  Low pay

Ø  Unsatisfactory terms and conditions of the workforce

Ø  Long working hours

Ø  Poor physical workspaces

Ø  Rigid working schedule

Ø  Poor work-life balance

Ø  Persistent skill gap

 

Nonetheless, the potential solutions mentioned below may help to lessen the labour shortage gap:

 

Ø  Prioritising work-life balance.

Ø  Practising transparency and honesty.

Ø  Improving the work environment and employee benefits.

Ø  Encouraging two-way communication.

Ø  Creating a clear career pathway. 

Ø  Promoting a positive workplace.

Ø  Recognising and rewarding employees frequently.

Ø  Providing more flexibility in terms of time and location

Ø  Upgrading existing and new employees’ training processes.

  

New Generation of Workers and Reasons Behind Labour Shortage

 

As today’s world is moving towards IR4.0, conventional jobs  with tight supervision, high management control, strict working time, and limited flexibility, are less attractive for employees, particularly youth, due to the existence of flexible jobs in terms of time, earning and independence.

 

For instance, from Malaysia’s standpoint, new sectors (e.g., Grab, FoodPanda, Lalamove and Airasia) have been established under IR4.0, enabling more young people to join in contrast to the conventional jobs that primarily controls them. In addition, the tables below display the significant differences between traditional and flexible jobs and the limitations of these two.

 

Table 2.0: Differences Between Conventional and Flexible
Jobs

 

Conventional jobs	Flexible jobs
–         Tight supervision, highly controlled by the management	–         Less supervision –         No management control
–         Rigid working time (8-5 pm)	–         Flexi-time (no time limit)
–         Fixed working conditions (3Ds, unstable weather conditions, exposure to accidents)	–         Flexi working conditions as the employees wish (driving their own car based on their preferred time and working condition)
–         Fixed basic salary (RM1,500 – minimum wage)	–         Unlimited income (works anytime and earns more than RM1500)
–         Long working hours	–         Flexible working hours

 

Source: Parasuraman, 2022

 

Table 3.0: Limitations of Conventional and Flexible Jobs

Conventional jobs	Flexible jobs
–         EPF, labour law	–         There is no explicit law
–         Accidents are claimable	–         There is no explicit law
–         Termination benefit –         Retrenchment benefit	–         No benefits
–         Chance to further studies (fully funded training programme)	–         No scholarship
–         Career development	–         Career development is unclear

Source: Parasuraman, 2022

 

 

Conclusion

 

As the markets stabilises and production levels recover to pre-pandemic levels, companies worldwide, including those in Malaysia, are facing a new challenge in the form of a labour shortage. Therefore, employers need to change their mindset (Ganesan, 2022). For instance, the
highly recommended flexible hours and jobs can solve the labour shortage (Blais-Auclair, 2021).

 

In Malaysia, business sectors have reopened as the country is entering the endemic phase, resulting in an upsurge in job creation. Yet, in the first quarter of 2022, many of these jobs have not been taken up (Khuen, 2022), as indicated by the unemployment rate, which remained high, at 4.1% (DOSM, 2022). Nevertheless, the nation’s unemployment rate reduced to 3.7% in July 2022 from 3.8% in June 2022.

 

The ongoing operation of all economic activities has further enhanced the Malaysian labour market condition, which led to an expansion in demand for employment (Salim, 2022).

 

Therefore, the COVID-19 pandemic urged many to re-evaluate where, how, and why they work. Some decided to retire early. Others stayed home to care for their children and the elderly, while some chose to start their own businesses or join the gig economy. As a result, the labour shortage is a vital global challenge that needs to be addressed, and Malaysia is no exception.

** The author would like to say thanks to Ms Nazanin Dara, a PhD Student from University of Cyberjaya who assisted me in this research project.

 

 

---

 Professor Dr. Balakrishnan Parasuraman is a Professor of Management/HR/Industrial Relations at the Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan (UMK) based in Kota Bahru, Kelantan. He is a member of the International Honor Societies of the International Employment and Labor Relations Associations (IIRA) based in Geneva, Switzerland, Malaysian Institute of HRM, and International Employment Relations Association, Sydney, Australia. 

---