-T5N-List-(Twitter)-(1).jpg)
By P Gunasegaram. Copyright March 2023
It may be the single most important statistic to determine our real economic standing at the moment
Which do you think is the single most important economic statistic right now for Malaysia? Think about it, roll it around in your head a little before you answer. And decide later if the figure proposed - the number of foreign workers in Malaysia - is the one.
One of the enduring mysteries in Malaysia is the number of foreign workers here. While the official legal figure is 2.1 million, according to Department of Statistics figures, this number may be as low as a third of total foreign labour, which includes illegal labour.
This figure is very important for it will tell us the magnitude of the problem we face. It will relate back to how and whether we can help the poor in Malaysia, it will raise many questions of whether we are productive or not. It will tell us how deep in economic problems we are mired.
It requires the attention of the prime minister and the economy minister. This is no exaggeration for getting a proper grasp of the problem will be key to lifting living standards for most Malaysians while being fair to our guest workers.
Most importantly it will force us to finally face up to the enormous problem of foreign labour - both legal and illegal - which is a threat to our economy and the well-being of every single person living in the country.
No, it is not the fault of migrant labour, it is our own fault and the fault of successive incompetent, interfering governments beginning with Mahathir Mohamad’s in 1981 which went the route of cheap labour and low value-added industry to fuel growth.
How do we estimate this? Many anecdotal numbers based on Malaysians’ interaction with illegal labour, put that at around the same amount of legal labour - perhaps around two million, to make a total of around four million workers.
But hang on, in late 2014, Minister of Human Resources then Richard Riot said that there were 2.1 million legal workers and 4.6 million illegals, making a total of 6.7 million - imagine, 70% of foreign workers were illegal! Apparently this figure was based on mobile phone data which indicates a high degree of accuracy.
But as pointed out in this paper by Lee Hwok-Aun and Khor Yu Leng, published in April 2018 and which gives a good account of illegal labour numbers, the 6.7 million figure has been steeply revised downward subsequently. I could not find the latest government estimates for illegal labour.
The paper estimated the minimum number of foreign workers at about 3.85 million and “possibly around 5.5 million.” But is the figure important? Most certainly it is.
It distorts economic performance considerably. Let’s take the 6.7 million figure - which implies an additional 4.7 million workers to the legal workforce or nearly 30% of the current legal workforce of 15 million.
Reported worker productivity will be much higher because 4.7 million workers are not recognised, pushing the figure upwards. Also, understating the population by 4.7 million or around 15%, pushes the per capita income higher by the same percentage.
This caused prominent economist Jomo Sundaram, a former member of the Council of Eminent Persons under Mahathir’s second term as PM, to lament in June last year that the country has misleading data on labour and foreign workers, warning that it has led to failure to get a grasp of serious issues.
What is more important is that the huge influx of foreign labour has had a rather deleterious effect on Malaysia. It caused huge distortions in the market for labour, keeping wages depressed for Malaysian labour artificially.
Look at it this way - if we imported cheap doctors from India in the thousands to deal with a doctor shortage in Malaysia, it will result in a plunge of doctors’ wages. Ditto for all the professions ranging from lawyers to accountants to engineers and for any other occupation.
But strangely, we import millions of workers from overseas and allow millions more to work illegally and artificially depress the wages of millions of Malaysian workers and don’t bat an eyelid. After deducting the foreign workers, official figures put the Malaysian workforce at around 13 million.
Perhaps as many two thirds of Malaysian workers or some 8.7 million Malaysian are manual and semi-skilled workers who compete directly for jobs with 6.7 million cheap migrant labour! What chance do they have?
Of the 8.7 million, at least 70% are likely to be Malays and other bumiputeras, a total of some six million in all. Their life and that of their dependents are doomed to poverty. Now we can see the origins of Malay poverty, and the poverty of other Malaysians - a succession of poor governments, starting with Mahathir’s. And these same people now talk of Malay poverty, coolly ignoring their role here.
The low wage argument is supported by a March 2018 Bank Negara Malaysia paper titled Low-Skilled Foreign Workers’ Distortions to the Economy. It said: “Malaysia’s transition to a high-income and developed nation is at risk, as long as firms are still engaged on a ‘race to the bottom’ in relation to labour costs and are unwilling to pay more, despite commensurable productivity gains had they adjusted.
“Employment of cheaper foreign workers vis-à-vis locals allows employers to keep wages low and in doing so, obviates the pressure to change the status quo. This distorts the natural wage clearing mechanisms that would have otherwise driven wages upwards.”
That’s a damning indictment against Malaysian employers in general who take the quick, easy option of cheap foreign labour and the government which has allowed and increased the practice over decades. For advocates of cheap labour, I recommend they read this paper.
Some steps are long overdue. The government needs to empower the Department of Statistics to make proper estimates of foreign labour - both legal and illegal - de-politicise the figures and make them public. Once this is done, it must have a plan to reduce foreign labour - over a period of say five years to no more than 15% of the workforce.
And finally it must force employers and incentivise them to go towards automation, use innovation and streamline operations towards higher productivity. That can only come about if they are required to pay for the real cost of labour.
Other countries - such as Australia - have done it without abusing foreign cheap labour. So can we. Otherwise we are not removing the most persistent cause of poor productivity in Malaysia, and therefore of poverty too.
P Gunasegaram is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
The User Content (as defined on Newswav Terms of Use) above including the views expressed and media (pictures, videos, citations etc) were submitted & posted by the author. Newswav is solely an aggregation platform that hosts the User Content. If you have any questions about the content, copyright or other issues of the work, please contact Newswav.
