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Showing posts with label KIRENNESH NAIR. Show all posts
Showing posts with label KIRENNESH NAIR. Show all posts

Wednesday, February 14, 2024

Rising number of informal workers

Maybank IB Research said the growth in informal jobs for 2023 was 6.5% compared to 9.7% in 2022.


“The challenges are really to do with a dysfunctional labour market, but fortunately, the rise of gig-economy work provides a market solution and a good option for many young people,” - Geoffrey Williams


PETALING JAYA: Despite witnessing stability in the unemployment rate within the local labour market, a growing number of informal workers are causing economist to worry about the cost of living crisis.

Maybank Investment Bank (Maybank IB) Research reported that the jobless rate within the Malaysian job market is showing signs of stability, holding at 3.3% in December 2023 for the second consecutive month, bringing the average unemployment for the year to 3.4%, down from 3.8% in 2022.

However, the research outfit expressed concerns about the rise of informal jobs and workers, specifically own account workers (OWA), as the number of such workers has been increasing since January 2021 from 2.39 million, reaching a new high of three million in December 2023.

Maybank IB Research said the growth in informal jobs for 2023 was 6.5% compared to 9.7% in 2022, surpassing total employment growth which stood at 2.4% in 2023 and 3.5% in 2022.

Malaysia University of Science and Technology economics professor Geoffrey Williams said there is no mystery about the increase in OAW, attributing it to being part of a long-term trend towards side hustles, micro-enterprises and gig-economy work.

“The number of people in this category has gone up because of the cost of living crisis.

“Household incomes are under pressure. So, women and youths are taking on casual, informal, gig-economy jobs to help their household out,” he noted in a reply to StarBiz.

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He believes there has been a rise in female labour force participation and a decline in youth enrollment in college for the same reason.

Williams said most of the people in the OAW category are youths and many of them are women.

According to him, under normal circumstances, they wouldn’t pursue such jobs.

However, he said, due to the pressure of high prices and persistently low incomes for male household members, women and young adults find themselves compelled to take on these jobs.

“Many of these jobs are also taken by graduates who cannot find graduate level work.

“They are underemployed, contributing to an overall structural problem of underemployment covering approximately two million people,” he added.

William said these jobs are predominantly low-paid and short-term, making them easily accessible.

“Although male and female average wages are similar in formal work, there is a gender income gap in informal work because women tend to take on low-paid, short-term informal work more often,” he said.

With regard to formal work, William said finding such employment is challenging as firms are still recovering from the Covid-19 crisis or transitioning to technology that reduces the need for human workers.

Additionally, William believes formal salaries are low, prompting people to opt for gig-economy and OAW jobs for better flexibility, even if the salary is not as lucrative.

Meanwhile, Maybank IB Research also pointed out the persistently stagnant youth unemployment rate, holding steady at 10.6% in December 2023.

“Youth unemployment has been ‘stuck’ between the 10.6% and 10.8% range since August 2023, thus still above the pre-pandemic low of 9.9% in December 2019,” it noted

Commenting in regards to this, William said youth unemployment is high worldwide due to a demand and supply issue within the younger labour market.

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“Companies do not have jobs to offer new recruits, graduates and school-leavers so demand for young people is low,” he said.

If companies do have job openings, Williams said the salaries are often below the poverty line, and the terms and conditions are generally unfavourable.

“The challenges are really to do with a dysfunctional labour market, but fortunately, the rise of gig-economy work provides a market solution and a good option for many young people,” he noted.

Williams said conventional economists will advise government interference and training, but he stressed that this will not work.

“Training does not create jobs, it just creates underemployment. The market creates jobs and it should be freed-up to create more jobs especially in gig-economy and freelance work,” he noted.

Research houses expect the local labour market to be resilient and stable, with some expecting improvement within the labour market.

While Maybank IB Research expects the unemployment rate to be stable at 3.4% in 2024, after moderating to 3.4% last year from 3.8% in 2022, both Kenanga Research and TA Research expect a further downtrend.

Kenanga Research, having adjusted its 2024 average unemployment rate estimate from 3.3% to 3.2%, anticipates that the labour market will maintain its robust performance in the near term and throughout 2024.

This expectation is based on the stability in job creation observed in recent months, coupled with the anticipation that the economy will receive additional support from the technology upcycle and China’s gradual economic recovery, particularly in the second half of 2024.

“Alongside continued tourist arrivals and spending, the ongoing progress of multi-year infrastructure projects by the federal government are expected to provide job opportunities,” it explained.

Nevertheless, Kenanga Research said structural issues in the labour market remain a key challenge.

This includes a significant number of youth unemployment, between 15 and 24 years old, standing at 307,200 or 10.6%.

Additionally, it said skill-related underemployment, defined as those with tertiary education and working in the semi-skilled and low-skilled categories, currently stands at 37.4%, reaching a record high of 1.94 million in the final quarter of 2023 (4Q23).

TA Research, meanwhile, believes jobless rate to average at 3.2% this year, with fluctuations between 3.3% and 3.1%.

It said the government is proactively addressing issues such as low pay through the wage progressive model, to enhance the overall well-being of workers.

“Furthermore, as we anticipate a resurgence in the Chinese market and a continuous uptick in domestic demand in Malaysia, the unemployment rate is expected to benefit positively,” it said.

TA Research added that the sustaining economic growth is likely to attract increased foreign direct investment (FDI) into the country.

It anticipates FDI inflow to stimulate business expansion, leading to additional job opportunities.

“The combined effects of government initiatives and the influx of FDI are poised to contribute to a more robust job market, creating favourable conditions for lower unemployment rates and improved overall labour market conditions,” it added.

Similarly, Hong Leong Investment Bank (HLIB) Research said Malaysia’s positive economic momentum that persisted throughout 2023 had increased the need for labour.

As a consequence, it said the number of employed persons steadily improved to keep up with industry demands, and the unemployment rate returned to pre-pandemic levels in November 2023.

“Going forward, we expect the labour market to remain supported by a further increase in tourism activities, the realisation of FDI projects as well as the government’s other job creation initiatives,” HLIB Research noted.

In absolute terms, the number of unemployed persons decreased to 567,800 in December 2023, marking the lowest figure since February 2020 when it was 525,200.

In December 2023, the labour force expanded 0.1% month-on-month albeit at a slower pace compared to the 0.2% in November 2023, with the total labour force reaching a record high of 17.03 million persons.

Thursday, August 3, 2023

Higher growth projected for 2023

Lee said interest rates may stay elevated for some time and expects Bank Negara to hold the OPR at the current level in 2023 and into 2024.

The commendable first-quarter showing augurs well, says the Socio-economic Research Centre

'STRUCTURAL REFORMS ARE KEY TO SUPPORTING THE ECONOMY AND RINGGIT' - Lee Heng Lee 

KUALA LUMPUR: The combination of declining exports, persistently high core inflation and cautious consumer spending will likely see the economy experiencing a moderation in growth in the second half of the year (2H23).

Despite anticipating a deceleration in economic growth in the upcoming quarters, Socio-economic Research Centre (SERC) has raised its 2023 gross domestic product (GDP) growth projection to 4.5% year-on-year (y-o-y) from 4.1% previously, to reflect the strength in the first-quarter (1Q23) economic growth.

The GDP expanded by 5.6% in 1Q23, exceeding the 4.8% growth achieved in 1Q22, thanks to sustained domestic demand underpinned by strong private expenditure and improvement in labour market conditions.

SERC executive director Lee Heng Guie said the robust consumer spending witnessed last year may not be replicated this year due to the high interest rate environment and more cautious consumer spending.

“The cash stimulus has already been spent and the spending boom, such as the ‘revenge spending’ that we saw post-pandemic, has already faded,” he said during SERC’S media briefing on the quarterly economic tracker for 2Q23.

Lee pointed out that the country’s exports had also started to ease as global demand weakens under the strain of high inflation and interest rates.

For 1H23, exports contracted by 4.5% y-o-y and Lee projects exports to decline by between 5% and 7% for the full year on the back of lower demand.

With these factors at play, SERC expects GDP to grow in a range of between 4% and 5% in 2H23, with consumer demand continuing to be the key growth driver in the remaining months of the year.

He added the elevated base effect in 2H22 will present another challenge to the 2H23 GDP performance.

On the overnight policy rate (OPR), Lee believes the current rate of 3% is at an “accommodative and supportive” level for sustainable economic activity.

He said interest rates may stay elevated for some time and expects Bank Negara to hold the OPR at the current level in 2023 and into 2024.

“Any change to the OPR is dependent on how resilient the economy is and how consumer inflation behaves.

“I think the current level is just right, (as) it will not significantly hurt the people.

“Structural reforms are key to supporting the economy and the ringgit.” Lee Heng Guie

“It is still supporting the economy, but does not overburden businesses and the people. Even though central banks are likely to end their rate hike cycles, it does not necessarily imply that they will reduce rates either,” he explained.

Lee expects most central banks to likely keep interest rates at current levels till inflation, both headline and core, subsides to a “comfortable range”.

In the majority of advanced economies, a comfortable range of inflation is around 2%, Lee observed. Although headline inflation has eased in Malaysia, Lee stressed the battle against inflation has not been won.

“This is because subsidy rationalisation is still on the table of the government. The government needs to address that following the state elections to control the budget deficit,” Lee noted.

Given the volatility in crude oil prices, Lee said the current oil subsidy scheme was fiscally unsustainable and would further contribute to deficits.

He added the ringgit had strengthened against the currencies of Japan, China, Australia, Taiwan and India since the US Federal Reserve’s (Fed) first federal fund rate hike in March last year.

However, against the greenback, the local unit is among a basket of currencies that have experienced a significant weakening after having declined by about 7.4% since the start of the rate hike cycle.

“Structural reforms are key to supporting the economy and the ringgit,” Lee stressed.

He said the proposed progressive wage model (PWM) plan, which is currently under consideration by the government, is a right step towards a productivity-linked wage system which will foster competitiveness by forging a stronger correlation between wages and productivity.

Lee, however, contends that a more comprehensive and practical analysis should be undertaken on the plan by a tripartite body, which includes representatives from the government, employers and employees.

This is due to the presence of valid concerns and areas of uncertainty within the proposal, such as whether the PWM would be extended to foreign workers and specific sectors.

In keeping the economy resilient, Lee emphasised on the importance of private investment.

He reiterated that private investment not only helped stimulate economic growth, but also generated jobs and thus benefiting both the community and the nation as a whole.

Speaking on the US economy, Lee believes that it is still resilient, citing the strength of its labour market and wage growth as indications. However, he said consumer spending remained robust and asserts inflationary pressure.

“In the United States, headline inflation has not reached the targeted 2% level, while core inflation remains sticky.

“This is something the Fed would be observing. If there is risk of inflation resurgence, it may still continue to increase rates,” Lee said.

Globally, Lee pointed out that the purchasing managers’ index for the manufacturing sector has continued its downtrend, sustaining below the 50-point threshold. The services sector, meanwhile, recorded a slight slowdown in its latest figures.

“We are worried the slowdown in the manufacturing sector has broadened and impacted the services sector,” Lee added.

On world trade volume and industrial production, Lee pointed out that both have been moderating, owing to slower demand. “This is why we saw a decline in exports for regional countries, including Malaysia, recently.”

The Star - StarBiz By KIRENNESH NAIR kirennesh@thestar.com.my 3 Aug 2023

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