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Work in an Evolving Malaysia The State of Households 2020 Part II Media Briefing 3 rd November 2020 Please scan for media registration WORK IN AN EVOLVING MALAYSIA THE STATE OF HOUSEHOLDS 2020 PART II Please scan for media MEDIA BRIEFING

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Work in an Evolving Malaysia

The State of Households 2020 Part II

Media Briefing 3rd November 2020

Please scan for media registration

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Khazanah Research Institute

WORK IN AN EVOLVING MALAYSIA

THE STATE OF HOUSEHOLDS 2020 PART II MEDIA BRIEFING

Scan here for press release, full report and accompanying materials

10:00AM Opening remarks

by Tan Sri Nor Mohamed Yakcop, Chairman of KRI

10:15AM Presentation of Key Findings

from Work in an Evolving Malaysia by Siti Aiysyah Tumin, Nur Thuraya Sazali and Hawati Abdul Hamid, Researchers at KRI

10:45AM Q&A* with Media 11:15AM End

*Journalists can start to type any questions in the Q&A function at the start of presentation to be answered during Q&A session. In the interest of time, we ask that journalists keep to questions related to the Report or KRI. Thank you.

Please scan for media registration

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Opening Remarks by Tan Sri Nor Mohamed Yakcop, Chairman of KRI

3rd November 2020 Media Briefing

Work in an Evolving Malaysia The State of Households 2020 Part II

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Key Findings by Siti Aiysyah Tumin, Nur Thuraya Sazali and Hawati Abdul Hamid, Researchers at KRI

3rd November 2020 Media Briefing

Work in an Evolving Malaysia The State of Households 2020 Part II

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Khazanah Research Institute Khazanah Research Institute

Background: Linking household income and work

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Khazanah Research Institute

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Employment-related income made up most of household income

Work in an Evolving Malaysia

Share of mean household income, by household head income source, 2012–2019

Note: Data expressed in 2019 prices. Source: DOS (2020b) and KRI Calculations

66.6 65.0 63.0 61.6 17.2 16.0 15.6 17.3 9.7 11.4 12.9 12.9 6.5 7.6 8.5 8.2 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 2012 2014 2016 2019 % Self-employment Paid employment Properties & investment Current transfers

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AAGR A: 8.2% B: 7.1 C: 3.5 D: 4.6 MALAYSIA: 6.3 A: 2.5% B: 2.3 C: 2.2 D: 3.8 MALAYSIA: 3.1 A: 5.4% B: 5.7 C: 5.2 D: 5.9 MALAYSIA: 5.6

Income gaps persists between states, as convergence has not been fast enough

Work in an Evolving Malaysia

2,552 9,581 1,338 4,239 1,708 5,873 2,000 4,000 6,000 8,000 10,000 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 RM10,000

Real median monthly household income by state group, 1989–2019

Note: Data expressed in 2019 prices. AAGR stands for average annual growth rate. Source: DOS (2020b), EPU (n.d.c) and KRI calculations

Group C Group A MALAYSIA Group B Group D

KL, Putrajaya & Selangor Johor, Melaka, N. Sembilan, P. Pinang & Terengganu Labuan, Sabah & Sarawak Kedah, Kelantan, Pahang, Perak & Perlis

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The little convergence was mainly driven by increased transfers, rather than wages

Work in an Evolving Malaysia Percentage point change in share of mean household income, by source for household head, by state, 2014–2019

Note: A negative percentage point change implies a decrease in the share of an income source and not necessarily a decrease in absolute RM terms. Source: DOS (2017), DOS (2020b), KRI calculations

1.2

  • 1.5

Selangor Putrajaya KL

  • 1.3

0.8 Sarawak Sabah Labuan 2.9 4.2 2.5 1.8 Perlis Perak Pahang Kelantan Kedah 0.7 1.9 Terengganu P.Pinang N.Sembilan Melaka Johor Paid employment Self-employment Property & investment Current transfers

  • 8.0 ppt
  • 4.0

+4.0 +8.0 ppt

Decreased income share Increased income share 0.0

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Framework in analysing economic structure, labour market and inter-state disparities

Work in an Evolving Malaysia

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State grouping, by household income, 2019

Selangor RM8,210 Sarawak RM4,544 Labuan RM6,726 Sabah RM4,235 Perak RM4,273 Pahang RM4,440 N.Sembilan RM5,005 Terengganu RM5,545 Melaka RM6,054 Johor RM6,427 Kelantan RM3,563 Kedah RM4,325 P.Pinang RM6,169 Perlis RM4,594 KL RM10,549 Putrajaya RM9,983

Sarawak Corridor

  • f Renewable

Energy Sabah Development Corridor Iskandar Malaysia Northern Corridor Economic Region East Coast Economic Region

Malaysia median: RM 5,873

Regional economic group and median household income, 2019

Note: Economic region based on EPU (2018). Map not to scale. Source: DOS (2020a), KRI classification and calculations

Household income ≥ 30% of national level in 2019, Peninsular states

Group A: KL, Putrajaya & Selangor Group B: Johor, Melaka,

  • N. Sembilan, P. Pinang &

Terengganu Group C:Labuan, Sabah & Sarawak Group D: Kedah, Kelantan, Pahang, Perak & Perlis

Household income ± 20% of national level in 2019, Peninsular states States in East Malaysia Household income below national level in 2019, other states

Periods in Malaysian economic development

Industrialisation, before AFC 1997/98

Period 1: 1989-1997 Period 2: 1999-2007 Period 3: 2009-2019

Deindustrialisation, before GFC 2007/08 Moderated deindustrialisation, after GFC

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Khazanah Research Institute Khazanah Research Institute

  • 1. Different employment

landscapes in different parts of the country

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Employment moved away from agriculture to manufacturing, with limited convergence

+Work in an Evolving Malaysia

Employment share, by economic activity and state group, 1982 – 2019

Note: Data unavailable for 1991 and 1994. Shaded areas cover Period 1 (1989 to 1997), Period 2 (1999 to 2007) and Period 3 (2009 to 2019) respectively. Source: DOS (2020b), KRI calculations

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Group C Group A MALAYSIA Group B Group D

KL, Putrajaya & Selangor Johor, Melaka, N. Sembilan, P. Pinang & Terengganu Labuan, Sabah & Sarawak Kedah, Kelantan, Pahang, Perak & Perlis

Agriculture Manufacturing

23.6 10.2 10 20 30 40 50 1982 1987 1993 1999 2004 2009 2014 2019 50% 25.0 17.8 10 20 30 40 1982 1987 1993 1999 2004 2009 2014 2019 40%

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High-technology manufacturing concentrated in advanced states

+Work in an Evolving Malaysia

Note: High-technology manufacturing refers to E&E products and transport equipment. Mid-technology manufacturing refers to manufacturing of petroleum, chemical, rubber, plastic, non-metallic mineral, basic metal and fabricated metal products. Low-technology manufacturing refers to manufacturing of food, beverages, tobacco, textiles, wearing apparel, leather, wood, furniture, paper and printing products. Adapted from Ng, Tan and Tan (2018). Source: DOS (2017a), KRI calculations

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38.7 37.6 45.7 15.5 33.6 33.4 38.5 30.7 20.3 35.9 27.9 23.9 23.6 64.2 30.5 20 40 60 80 100 MALAYSIA Group A Group B Group C Group D 100%

Group A: KL, Putrajaya & Selangor Group B: Johor, Melaka, N. Sembilan,

  • P. Pinang &

Terengganu Group C: Labuan, Sabah & Sarawak Group D: Kedah, Kelantan, Pahang, Perak & Perlis MALAYSIA

36.7 39.7 46.1 5.1 39.4 43.1 37.2 38.0 69.4 41.1 20.2 23.1 15.9 25.6 19.5 20 40 60 80 100 MALAYSIA Group A Group B Group C Group D

Group A: KL, Putrajaya & Selangor Group B: Johor, Melaka, N. Sembilan,

  • P. Pinang &

Terengganu Group C: Labuan, Sabah & Sarawak Group D: Kedah, Kelantan, Pahang, Perak & Perlis MALAYSIA

100% Low-tech Mid-tech High-tech

Employment Value added Manufacturing employment and value added share, by subsector and state group, 2015

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Employment shifted to services, “modern” services concentrated in advanced states

+Work in an Evolving Malaysia

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Note: Data unavailable for 1991 and 1994. Shaded areas cover Period 1 (1989 to 1997), Period 2 (1999 to 2007) and Period 3 (2009 to 2019) respectively. Source: DOS (2020b), KRI calculations

Modern services Other services

Group C Group A MALAYSIA Group B Group D

KL, Putrajaya & Selangor Johor, Melaka, N. Sembilan, P. Pinang & Terengganu Labuan, Sabah & Sarawak Kedah, Kelantan, Pahang, Perak & Perlis

14.6 6.8 5 10 15 20 1982 1987 1993 1999 2004 2009 2014 2019 20% 59.4 56.1 30 40 50 60 1982 1987 1993 1999 2004 2009 2014 2019 60%

Employment share, by economic activity and state group, 1982 – 2019

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… and “traditional services” expanded in the last decade throughout the country

+Work in an Evolving Malaysia

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5.5 4.0 4.3 7.4 6.4

  • 1.4
  • 3.0
  • 0.1
  • 2.3

0.2

  • 1.2
  • 0.7
  • 2.0
  • 1.4
  • 2.2
  • 4

4 8 Malaysia Group A Group B Group C Group D 8 ppt “Traditional services” Wholesale & retail, transportation & storage; admin & support services; accommodation & food;

  • ther services

“Social services” Education; health & social work; public administration, defense & compulsory social services; utility services “Modern services” Finance & insurance; real estate; information & communication; professional, scientific & technical

A: KL, Putrajaya, Selangor B: Johor, Melaka, N. Sembilan, P. Pinang, Terengganu C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis MALAYSIA

Group A: KL, Putrajaya & Selangor Group B: Johor, Melaka, N. Sembilan,

  • P. Pinang &

Terengganu

Group C: Labuan, Sabah & Sarawak Group D: Kedah, Kelantan, Pahang, Perak & Perlis MALAYSIA

Source: DOS (2020b), KRI calculations

Change in services employment share, by subsector and state group, 2009 – 2019

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The labour market is not independent of the larger economy

+Work in an Evolving Malaysia

Capital formation per GDP share, 1989 – 2019 Annual value added and total wages paid per employment, by firm type, 2015

Note: Shaded areas refer to Period 1 (1989 to 1997), Period 2 (1999 to 2007) and Period 3 (2009 to 2018) respectively. Values displayed in constant RM. Source: World Bank (n.d.b), KRI calculations

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Source: DOS (2016a), DOS (2017a), KRI calculations

0.0 10.0 20.0 30.0 40.0 50.0 1989 1994 1999 2004 2009 2014 2019 Avg.: 38.2% CAGR: 16.2% Avg.: 23.6% CAGR: 5.8% Avg.: 23.9% CAGR: 6.1% 50% 74 183 23 38 50 100 150 200 SME Large SME Large RM200k Value added per employment Total wages paid per employment

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Khazanah Research Institute Khazanah Research Institute

  • 2. Better labour market
  • utcomes in advanced states
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Developed states have higher labour force participation rates, especially for women

+Work in an Evolving Malaysia

Working age population share and LFPR, by state group, 2019 Women’s LFPR by state group, 1982 – 2019

Source: DOS (2017b), DOS (2020b), KRI calculations

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69.4 71.2 68.9 71.5 66.8 68.7 74.8 67.5 69.3 63.1 55 60 65 70 75 80 MALAYSIA Group A Group B Group C Group D 80% Share of working age population Labour force participation rate

A: KL, Putrajaya, Selangor B: Johor, Melaka,

  • N. Sembilan,
  • P. Pinang,

Terengganu C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis MALAYSIA

67.7% 55.6% 30% 40% 50% 60% 70% 1982 1987 1993 1999 2004 2009 2014 2019

Note: Data unavailable for 1991 and 1994. Shaded regions cover Period 1 (1989 to 1997), Period 2 (1999 to 2007) and Period 3 (2009 to 2019) respectively. Source: DOS (2020b), KRI calculations A: KL, Putrajaya, Selangor MALAYSIA B: Johor, Melaka, N. Sembilan, P. Pinang, Terengganu C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis

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Unemployment is higher in less advanced states

+Work in an Evolving Malaysia

Source: DOS (2020c), KRI calculations

18 Unemployment rate, by demographic characteristic and state group, 2019

3.3 2.8 2.5

4.7 3.2

10.5 10 8.2

12.5 10.9

1.7 1.8 1.4 2.2 1.4 5 10 15 MALAYSIA Group A Group B Group C Group D Overall Youth (15 to 24) Adult (25 to 64) A: KL, Putrajaya, Selangor B: Johor, Melaka,

  • N. Sembilan, P. Pinang,

Terengganu C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis MALAYSIA 15%

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Skilled jobs expanded in advanced states, while low-skilled jobs expanded elsewhere

+Work in an Evolving Malaysia

Change in employment share, by skill level and state group, 2001 – 2019

Note: Skill classification follows DOS (Various years.c). Source: DOS (2020b), KRI calculations

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3.2 4.9 4.0

  • 4.9
  • 4.4
  • 10.1
  • 3.1

1.7

  • 4.1

11.3 1.5

  • 12
  • 8
  • 4

4 8 12 Malaysia Group A Group B Group C Group D

A: Kuala Lumpur, Putrajaya, Selangor B: Johor, Melaka,

  • N. Sembilan,
  • P. Pinang,

Terengganu C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis

12ppt

MALAYSIA

Low skilled Semi-skilled Skilled

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Similar to household income, salaries are also higher in more developed states

+Work in an Evolving Malaysia

Median and mean monthly wages, 2019

Note: Refer to wages of citizens only. Source: DOS (2019f), KRI calculations

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1,000 2,000 3,000 4,000 5,000 KL Putrajaya Selangor Johor Melaka

  • N. Sembilan
  • P. Pinang

Terengganu Labuan Sabah Sarawak Kedah Kelantan Pahang Perak Perlis Median Mean Median Malaysia: RM2,442 RM5,000 Mean Malaysia: RM3,224

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…but vulnerable employment is increasing advanced states

+Work in an Evolving Malaysia

Share of vulnerable employment, by state group, 1982 – 2019

Note: Data unavailable for 1991 and 1994. Shaded regions cover Period 1 (1989 to 1997), Period 2 (1999 to 2007) and Period 3 (2009 to 2019) respectively. Vulnerable employment includes own account workers and unpaid family workers. Source: ILO (2018b). Source: DOS (2020b), KRI calculations

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0.0 20.0 40.0 60.0 1982 1987 1993 1999 2004 2009 2014 2019 60% A: KL, Putrajaya, Selangor MALAYSIA B: Johor, Melaka, N. Sembilan,

  • P. Pinang, Terengganu

C: Labuan, Sabah, Sarawak D: Kedah, Kelantan, Pahang, Perak, Perlis

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  • 3. The shrinking middle?
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Service & sales are the only expanding semi-skilled job, but sluggish wage growth

+Work in an Evolving Malaysia

Job and wage polarisation, by skill level and occupation, 2011 – 2019

Note: Skill classification follows ILO (n.d.c) and DOS (various years.b). Source: DOS (2020i), DOS (2020b), KRI calculations

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1.5

  • 1.5

0.0

  • 1.0

2.6

  • 0.1
  • 1.1

2.4

  • 2.0
  • 0.4
  • 0.3

0.0 Skilled Semi-skilled Low skilled Managers Professionals

  • Asc. professionals

Clerical workers Service & sales workers Skilled agricultural workers Craft workers Production operators Elementary occupations Semi-skilled Skilled Low-skilled 5,073 2,205 1,751 8,855 5,589 3,651 2,482 2,060 2,247 2,197 2,144 1,751 3.9 3.6 5.2 5.6 4.1 3.1 2.9 3.4 5.9 3.9 4.3 5.2 Overall

Change in employment share (ppt, 2011 - 2019 Mean monthly salary (RM, 2019) Annual wage growth (%, 2011 – 2019)

Service & sales workers

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These are also jobs more susceptible to be automated

+Work in an Evolving Malaysia

Employment share versus automation probability, 2016

Source: Data cited in KRI (2018c), methodology based on KRI (2017a), KRI calculations

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Health professionals Sales … Skilled agricultural workers 10 20 50 100 Employment share (%) Automation probability (%) Skilled Semi-skilled Low skilled

Sales workers

MALAYSIA 50 100 50 100 Adjusted employment share (%) Unadjusted employment share (%)

MALAYSIA Adjusted: 48.8% Unadjusted: 67.8% Estimated employment share susceptible to automation, by selected developing country, latest available year

Note: Grey space indicates that adjusted technological unemployment (TU) is lower than unadjusted TU. Source: World Bank (2016)

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Khazanah Research Institute Khazanah Research Institute

  • 4. Covid-19 has made many

unemployed and vulnerable

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Covid-19 may accelerate the automation of some jobs in the country

+Work in an Evolving Malaysia

Automation probability versus jobs that can work from home share and Malaysia’s employment share, by occupation

Note: Automation probability refers to computerisable probability estimated based on US 2013 employment data, jobs that can work from home share estimated based on US 2020 employment data (higher share means the job is more likely to survive Covid-19 as they can continue working from home when countries implement containment measures). Bubble sizes indicate Malaysia’s share of employed persons in 2016. Source: Data cited in KRI (2017a), KRI calculations based on Dingel and Neiman (2020)

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Teaching professionals Info & communications tech professionals Business and admin professionals General & keyboard clerks Sales workers

  • 20

20 40 60 80 100 120

  • 20

20 40 60 80 100 120 140 160 180 Automation probability (%) Jobs that can work from home share (%) Skilled Semi-skilled Low skilled Sample Reference: 5% Employment share (Malaysia)

0% 0%

Sales workers

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Unemployment rose and the self-employed are the most vulnerable

+Work in an Evolving Malaysia

Unemployment rate, by selected country, Q2 2019 and Q2 2020 Share of respondents, by employment status and effects of MCO during Covid-19, March 2020

Note: The second quarterly ended in June, except for the Philippines (July). Source: CEIC (n.d.)

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Note: Data is not representative. Source: DOS(2020)

46.6 23.8 1.1 50 100 Work from home Leave (paid) Leave (unpaid) Job loss Changing hours No impact 100% Employees Employers Own account workers 5.4 3.3 4.1 3.0 2.4 2.2 1.0 10.0 5.1 4.3 4.0 2.8 2.7 2.0 2 4 6 8 10 12 Philippines MALAYSIA South Korea Singapore Japan Vietnam Thailand Q2 2020 Q2 2019 0% MALAYSIA

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Headline unemployment can be deceptive. UR increased but LFPR dropped as well

Unemployment and labour force participation rate, 2019 vs 2020

Source: DOS (2020)

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68.6 68.5 68.5 68.5 68.5 68.6 68.5 68.6 3.3 3.3 3.4 3.4 3.3 3.3 3.3 3.3 January February Mac April May June July August

2019 Potential reasons (1) people might have to take up any jobs with less hours (2) people might leave the labour market out of discouragement or necessity

68.9 68.7 68.6 68.1 68.0 68.1 68.1 68.4 3.2 3.3 3.9 5.0 5.3 4.9 4.7 4.7 January February Mac April May June July August

2020 Unemployment rate Labour force participation rate

+Work in an Evolving Malaysia

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Khazanah Research Institute Khazanah Research Institute

  • 5. Work should not just exist,

it should be decent

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Decent work deficits still exist in some enclaves of our workforce

+Work in an Evolving Malaysia

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While most surveyed young workers in Kuala Lumpur earned more than mandated minimum wage level, many still earned below the living wage

Surveyed young employed person share, by earning relative to living wage, Kuala Lumpur, 2018

Note: Real (in 2018 prices) thresholds were applied on surveyed data. Source: KRI (2018b), KRI calculations

Some economic activities remain to be dangerous, although we have seen declining injury rates over time

Fatal injuries per 100,000 workers, by economic activities, 2011 – 2017

5 10 15 20 25 30 2011 2012 2013 2015 2017 Agriculture, forestry and fishing Mining and quarrying Manufacturing Construction Services

Source: ILOSTAT (n.d.), KRI calculations

88 77 52 4 12 23 48 96 50 100 Single (BNM) Single, with a car (EPF) Single, without a car (EPF) Minimum wage Earning below Earning above 0%

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We should aspire for decent jobs for all

+Work in an Evolving Malaysia

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“Opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.”

International Labor Organization Virtuous cycle of decent work

More decent work Higher earnings Higher savings Higher investment

Rights at work Productive Employment Social Protection Social dialogue

  • 1. Employment
  • pportunities
  • 2. Adequate

earnings and productive work

  • 3. Decent hour
  • 4. Balancing

work, family and personal life

  • 5. Unacceptable

work

  • 6. Stability and

security of work

  • 7. Equal
  • pportunity and

treatment

  • 8. Safe work
  • 9. Social

security

  • 10. Social

dialogue, & workplace relations

PILLARS OF DECENT WORK

Source: International Labour Organization, KRI illustration

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Khazanah Research Institute

Q & A Session

Please:

  • Ask your questions via Zoom’s

Q&A function

  • Include your name &
  • rganisation
  • Keep questions related to State
  • f Households or KRI

Scan for press release, full report and accompanying materials

+Work in an Evolving Malaysia Media Briefing Please scan for media registration

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Khazanah Research Institute

For any follow-up questions, please contact the following KRI researchers: Siti Aiysyah Tumin siti.tumin@KRInstitute.org

  • r

Nur Thuraya Sazali thuraya.sazali@KRInstitute.org

  • r

Hawati Abdul Hamid hawati.hamid@KRInstitute.org

Thank you

+Work in an Evolving Malaysia Media Briefing

Scan for press release, full report and accompanying materials

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Khazanah Research Institute

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Stay tuned for more on The State of Households 2020

@KRInstitute Or Khazanah Research Institute www.KRInstitute.org