The COVID-19 pandemic has caused significant disruption among businesses, spilling down to impact workers and employers throughout the ASEAN region. ASEAN economies and labour markets have been affected through various channels, including lockdown measures to curb the virus's spread, a dramatic decline in tourism, reduced domestic consumption, and disruptions in global supply chains. Given their varied national circumstances, ASEAN member states have responded to the crisis with a range of fiscal support measures aimed at maintaining household income and consumption, protecting jobs, and supporting business sustainability through emergency financing. In May 2023, the World Health Organization (WHO) announced the conclusion of the Public Health Emergency (PHE). Eventually, the unemployment rate in most ASEAN countries returned to its pre-pandemic levels in 2023; Malaysia (3.43%), Indonesia (5.32%), Philippines (5.10%), Singapore (1.90%) and Thailand (1.10%).
In 2023, Indonesia, with a population exceeding 140mn, boasts the largest labour force in ASEAN, predominantly comprising young individuals. Since 2019, Indonesia, the world's fourth most populous country, has benefited from a demographic dividend with a workingage population larger than the non-working-age segment, and over 80% of its workforce is under 55. The Philippines has a labour force of over 42mn, with a 63% labour force participation rate, where over 10mn work in the informal sector and nearly 40% are employed in vulnerable forms of work. Meanwhile, Thailand's workforce has reached around 40mn with a 68% labour force participation rate, yet it faces two significant challenges in the next five years: shortages of IT skills and English language proficiency. Singapore's workforce in ASEAN is small yet highly skilled, with the government consistently monitoring and analysing its labour market to make evidence-based predictions on future needs. Malaysia has the highest labour force participation rate among the aforementioned region, and its labour force expansion remains favourable. Yet, population ageing is a well-established phenomenon, as the country moves assertively towards becoming one of the ageing nations by 2030.
MALAYSIA'S WORKFORCE IS AGEING
The United Nations has projected that Malaysia will become an ageing nation by 2030, with 15% of its population being aged 60 and above. This demographic shift could impact the country's development as a significant portion of the population will retire. Over the past decade, the proportion of older workers in Malaysia has risen steadily, from 7.8% of total employment in 2012 to 8.6% in 2022. The conundrum of an ageing population will continue to plague the nation if the landscape that creates such situation prevails; the constrictive demographic and socio-economic factors. One of the most touted reasons is increasing costs of living crisis, leading to lower birth rates as parents opt to have a smaller family due to work-related time and financial restrictions. Of note, the total fertility rate (TFR) in Malaysia has been on a declining trend, slip from 2.1 children per female in 2010 to 1.6 children per female in 2022. Think of it as an inverted triangle – there will be a large room to fill once the top employees filter out, but the quantity of younger workers is relatively much smaller. As more people surpass retirement age, the workforce will shrink, potentially reducing labour productivity. This demographic shift also strains existing pension and social protection systems.
HIGH YOUTH UNEMPLOYMENT RATE COULD HINDER PROGRESS
Despite having the largest and predominantly young labour force in ASEAN, Indonesia faces challenges like the looming Gen Z job crisis. According to the World Bank, Indonesia's youth unemployment rate in 2023 was 13.3%, higher than its regional peers: Malaysia (10.7%), Singapore (7.6%), the Philippines (6.7%), and Thailand (5.5%). Indonesia has entered a demographic bonus phase, where the working-age population (15-64) surpasses the non-working-age population, potentially enhancing economic growth. However, this advantage could turn into a setback if the productive population fails to achieve required productivity levels. One of the major challenges facing the government is to swiftly create enough jobs for the growing youth population. Failing to achieve this could result in a rise in unemployment and economic downturn. Although Malaysia's labour market is expected to remain stable throughout 2024 and youth unemployment has dropped to its prepandemic low, concerns persist about the still-high youth unemployment rate. It eased to 10.5% in May 2024 after holding steady at 10.6% for six consecutive months, with the number of unemployed youths recorded at 305.6k. A prominent factor contributing to the
issue is the mismatch between the skills that industries need and those taught by local universities. There is no doubt that underemployment is also one such issue that burdens the youth group where in the occasion they land an employment, it is oftentimes not fully utilizing their potential. Nevertheless, the government has taken steps to address the lack of industry-relevant skills, through the UP_TVET system and Bina Kerjaya programmes, and the mismatch between graduate qualifications and employment opportunities, through the MYFutureJobs initiative, although there is still room for more support measures.
MOVING FORWARD
In addressing the existing issues, the government must take the mantle to lead by example as they have the tools and reach to properly rectify the situations. Educational training for both seniors and younger generations must be provided to promote inclusive practices, ensuring a smooth transition to an ageing workforce, and maximizing everyone's potential. Additionally, the government could improve the standard of education through collaboration among industries and academia, whilst implementing upskilling policies and a universal training system to address the skills mismatch. Moreover, in the rapidly developing technological landscape, relevant parties should improve automation and digitalization among SMEs to create high-skilled jobs and boost productivity. Further, enhance wage policies to ensure fair compensation, considering a differentiated minimum wage for high-skilled workers and graduates. Recently, the Human Resources Ministry anticipated the implementation of the Progressive Wage Policy (PWP) in October, aiming to increase workers' incomes and advance salary growth in Malaysia.
The ASEAN region sees global supply chain shifts, driving ongoing economic growth and new job opportunities. Job potential is significant across ASEAN, especially in the advancing ASEAN-5: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Malaysia's labour market expanded in 2023, buoyed by resilient domestic demand despite external challenges. Economic growth is expected to continue with robust domestic spending, tourism growth, a strong labour market, and increased revenue. Public sector investments in infrastructure, part of the 12th Malaysia Plan, will create more jobs, bolstering the labour market and economic outlook.
Source: BIMB Securities Research - 6 Aug 2024
Created by kltrader | Nov 12, 2024
Created by kltrader | Nov 11, 2024
Created by kltrader | Nov 11, 2024
Created by kltrader | Nov 11, 2024