LABOUR FORCE SUPPLY AND DEMAND IN PENINSULAR MALAYSIA

Abstract

As a country whose traditional comparative advantage lies in low-wage, labour-intensive industries, Malaysia (of which Peninsular Malaysia is a main component) has witnessed the phasing out of such industries, so as to reduce the pressure of labour shortages. Although the thriving Malaysian economy has provided employment opportunities to counter the high unemployment rates of the 1970s and early 1980s, labour force growth has not been able to keep up with the growth in labour demand in recent decades. This is especially true for skilled and semi-skilled workers, a dearth of which exists in the engineering, medical and health sectors. As such, employment projections and labour supply projections for the coming decades will be useful to gauge whether the labour shortage situation will deteriorate further. This study focuses on the projection of labour demand and supply in Peninsular Malaysia from 1995 through 2020. In the process of projecting the labour demand, the future sectoral GDP growth rates for Peninsular Malaysia were also constructed. These sectoral GDP projections indicate that the industrial and modern services sector are expected to continue to be the engines of economic growth well into the next century. The findings of this study highlight the critical labour shortages indicated by the projected total labour supply and employment should Peninsular Malaysia sustain output growth rates of 8 per cent or more. The results are consistent with the Malaysian government's findings with regard to the future labour market situation. It is further concluded that heavy reliance on foreign labour is not the key to solve the labour market constraints of the economy. The solution may come from within the local labour supply and also from the restructuring of the economy, entailing manpower planning and training.