Unemployment in Malaysia: It is the right time for a “Federal Job Guarantee”

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By Muhammad ‘Aamil Azhar, Research Analyst, Institut Masa Depan Malaysia

05/02/2021

If Covid-19 is a crisis of public health, it has also ignited the crisis of unemployment. Whereas Covid-19 would last 2 or 3 years, its impact on employment would most likely last 2 to 3 generations long.

According to the Department of Statistics in January 2021, Malaysia’s unemployment rate rose by a marginal 0.1 percentage point month-on-month to 4.8% in November 2020 with 764,400 unemployed persons. The actively unemployed — defined as persons who are available for work and are actively looking for work — went up by 2.3% to 637,700 persons (October 2020: 623,100 persons), and the inactively unemployed or discouraged group who believed there were no jobs available increased by 1.3% to 126,700 persons (October 2020: 125,100 persons).

For a country that is heavily dependent upon consumption to drive its economy, Malaysia cannot afford the high levels of joblessness. This is because unemployment have a far-reaching ripple effects, where the loss of employment for one person would cause the loss of income for other people and this could snowball into a national economic crisis.

There has been never a more urgent time to bring forward the government’s role in ensuring employment for all Malaysians. This is why, Institut Masa Depan Malaysia (Institut MASA), a think tank established to propagate policy ideas and analysis guided by shared prosperity values urges the government, to seriously consider in adopting a “federal job guarantee” scheme.

In Malaysia, the idea of a federal job guarantee has recently caught more attention due to the promotion made by the UMNO Information Chief, Shahril Hamdan. But internationally, Bernie Sanders, one of the US Democratic presidential candidates has championed this scheme since 2018.

What is a job guarantee (JG)?

According to its most eminent expert, Pavlina Tcherneva, a JG is a federally run, locally administered and universal job programme that provides every worker with decent work.

What do you mean by decent work?

A job that pays the living wage (RM2,205 monthly, for Malaysia), provides full benefits (family health insurance) and is available in flexible working arrangements.

Jobs for everyone, and run by the government, how is it funded then?

Unemployment is already paid for by the society in terms of enlarged spending for unemployment insurance (EIS), public health service, Bantuan Sara Hidup (BSH), and other anti-poverty expenditure.

Why can’t we just wait for the pandemic to end, the economy to rebound and then everybody would get a job in the private sector as usual?

Time and time again, the growth of the economy would not necessarily mean a growth in employment. There have been countless recessions/ depressions/ downturns and subsequently many other recoveries/ upswings/ revitalisations, but the benefits do not accrue to the workers. Jobless recoveries have become the norm in the modern economy.

A JG would benefit the economy immensely. With 7.239 million people in the working-age out of the labour force (read: discouraged from working), the JG would most optimistically re-add 7 million Malaysians into productive capacity. This would increase the GDP, decrease dependence on foreign labour and outward remittances as well as increasing adoption of technology.

Besides ‘just’ providing work for anybody in the labour force, it would also give an option to the roughly 40% of all Malaysian workers to exit their jobs which provide little to no social protection or employment benefits. Federally mandated JGs would provide every one of its participants a higher standard of dignified work.

A job guarantee would be in line with the country’s 10-year plan towards sustained growth and social well-being, the Shared Prosperity Vision 2030 (SPV2030). Moving forward towards a digitized and robotized world, Institut MASA believes that the welfare of the everyday man will be protected with the implementation of such schemes.