Wage growth and education flexibility drive buoyant job market in Malaysia
Accelerating wage growth is keeping Malaysia’s labour market buoyant, according to the seventh edition of the Hays Global Skills Index, a report published by recruitment experts Hays in conjunction with Oxford Economics. This year’s report – titled “Investing in the Skills of Tomorrow; Avoiding a Spiralling Skills Crisis” – examines professional employment markets across 33 countries and markets and measures the ability of companies to access skilled workers, providing a unique insight into the health of the global labour market.
In Malaysia, the Overall Index score is 4.6, suggesting that its labour market is less pressured than historical norms. The Overall Index score is an aggregate of the seven key indicators which were chosen to highlight supply-side issues, demand-side issues, or both supply- and demand-side issues relating to the hiring of skilled workers.
Robust wage growth is the biggest contributor to Malaysia’s higher score this year. As businesses compete for talents, employers in the country have been more willing to give dramatic pay rises of between 10-20 per cent to new employees, compared to the yearly increments they are willing to give to their current staff members, usually between 6-10 per cent. By contrast, slower wage growth in higher-skilled occupations has led to a narrower occupational wage gap. This reduces pressure on firms seeking highly-skilled staff.
Education flexibility in the country has had a marked improvement in the past year. A lower score in this respect indicates that Malaysia’s education system is flexible enough to meet labour market needs. The increasing number of new entrant university graduates in Malaysia is potentially resulting in a larger workforce available to employers.
Across Asia*, general participation rates have been driven up by improvements in education levels and other socioeconomic factors. This year, however, a slowdown in the growth of labour market participation rates across various age groups has been a major driver of the region’s higher score. Businesses are therefore struggling to find the right talent and continue to suffer from low productivity levels.
Commenting on the findings of the Index, Tom Osborne, Managing Director at Hays Malaysia said: “The Index provides us with invaluable information about labour markets and whether the global workforce is equipped with the skills required to flourish in the rapidly developing world of work. This year’s Index has revealed the many issues currently in the labour market globally, such as the growing talent mismatch, widespread productivity puzzle, ageing population, gender pay gaps and the shirking share of the national income for workers.” “In Malaysia, a gradual easing of the Overall Index score in recent years reflects the growing capabilities of the local labour market to meet the demands of employers in most industries and professions. Indeed, the rapid growth in output in the country supports increased demand for labour. The unemployment rate, low by international standards, continues to edge down very slowly reaching just over three per cent. Wage growth in the manufacturing sector has been running at over nine per cent for much of the past year.”
“Be that as it may, looking to the longer term, the World Bank believes that Malaysia’s education system is insufficient to support a high-income economy. Businesses and policy makers should by no means rest on their laurels as they face important choices. Adapting to a new workforce composition in the face of rapid technological change is challenging, as workers’ productivity and capacity to transition into different occupations will depend on their ability to develop new skills. Education and on-the-job training should therefore be a priority, enabling businesses and workers to boost their productivity, which will in turn help workers to retain good-quality jobs and boost wage growth.”
*In Asian countries/ regions in which Hays operates: Mainland China, Hong Kong, Malaysia, Japan and Singapore