BRIDGING SUPPLY AND DEMAND IN THE LABOUR MARKET
THE economic performance during the recovery periods impacts significantly the labour market conditions.
The current labour market indicators show a significant improvement as the unemployment rate declined from 5.3% in May to 4.9% in June and further dropped to 4.7% in July 2020.
These improvements are the results of active government interventions in the economy through various stimulus packages that directly and indirectly affect employment.
During the recovery periods and beyond 2020, the economy has to focus on redeploying and reskilling talents with the help of realtime data insights.
This article aims to provide new insight into identifying vulnerable jobs by occupation types, and possible explanations for the low job placement rates.
Analyses in this article are based on the real-time administrative data recorded and monitored by the Office of Employment Insurance System (EIS) at the Social Security Organisation (Socso) as well as survey databases from other sources.
Due to space constraint, statistical analyses are not discussed in detail, but they serve as grounds for a more comprehensive and in-depth policy-oriented discussion.
Pandemic impacts labour market differently
The unprecedented nature of the Covid-19 pandemic has initiated one of the most unexpected upheavals in decades, which have seriously affected the labour market conditions.
The impact of the Covid-19 pandemic on the labour market is different than other outbreaks such as SARS, avian flu (H5N1) and swine flu (H1N1).
The Covid-19 pandemic also affects the labour market differently than other economic crises.
For example, the global financial crisis in 2008 began with disruption to the US real estate and financial markets and only spread to financial and real economy in the rest of the world after a certain time delay.
The Covid-19 pandemic is exerting a more radical and abrupt effect. It has put the real economy out of action immediately and completely – evaporating supply and demand simultaneously.
Plantations, factories, businesses, schools and government were closed for more than two months, which resulted in supply lines to dry up almost completely except essential services.
These supply shocks seriously caused a spike in loss of employment (LOE), as illustrated in Figure 1.
The LOE is mainly influenced by the rates of economic growth. The higher the gross domestic product (GDP) growth, the smaller the size of LOE, and vice versa.
The LOE in 2019 was higher than in 2018 because the GDP growth in 2019 was relatively lower at 4.3% compared to 4.8% in 2018.
As at Sept 25, 2020, a total of 81,217 workers have lost their jobs, with 66% or 54,584 of LOE occurring between May and August 2020.
The LOE of private sector employees is recorded and monitored by the EIS at Socso. The LOE excludes compulsory retirement, voluntary resignation, expiry of a fixed-term contract and retrenchment due to misconduct.
The real-time administrative data is extremely useful for monitoring labour market reactions, in particular to the economic performance during recovery periods of Covid-19.
The LOE database at Socso EIS is also considered as one of the appropriate predictors for monitoring economic performances.
There is a clear association between the LOE and GDP as depicted in Figure 2. The number of LOE began to increase when the GDP growth rates started to contract in the first and second quarters of 2020.
Identifying vulnerable jobs
Socso EIS database shows that the economic impact from the Covid-19 pandemic mostly affects the PMET category – professionals, managers, executives and technicians (see Figure 3).
Of the total 81,217 LOE recorded as at Sept 25, 2020, employment losses for the PMET category made up 59% or 47,622. Essentially, the PMET category is associated with high skilled/high-education employees.
For the non-PMET category, employment losses are relatively lower at 41% of the total LOE.
From the production perspective, labour is the variable input that can be changed subject to economic conditions.
In the case of Covid-19, firms incur high production costs due to supply shocks (goods and services). To manage their cashflow, firms will likely reduce the size of their labour force.
Among the types of workers, those in the PMET category are likely to be laid off first to ensure the survival of the business.
Employees in the PMET category are not “immune” to the economic crisis brought about by large-scale disruption like the Covid-19 pandemic.
In fact, they are the ones hardest hit by LOE and will find it the most difficult to secure equivalent jobs and pay during the pandemic crisis.
Policy intervention of LOE for the PMET category may require specific attention from the policy makers compared to non-PMET workers due to three main reasons.
First, our economic growth creates more jobs for non-PMET than PMET workers. For example, demand for PMET increases 2.3% per annum between 2010 and 2019 whereas demand for nonPMET expands relatively higher by 2.4% per annum.
Second, a large number of LOE for PMET tend to create heavier financial burden when jobs are mostly available for non-PMET categories.
Third, the low rate of job matching and placement for PMET due to mismatch in wages and skills.
Analyses in the following section address the low job placement for the PMET category and potential drivers that explain the situation.
Low placement rate for PMET employees
The database at Socso EIS allows us to compare three important indicators for monitoring labour market: LOE, vacancies and placement.
These indicators are important to observe the efficiency of the labour market during and after a crisis.
Total vacancies tabulated in Figure 3 is obtained from the MyFutureJobs database. MyFutureJobs is a national job portal maintained and monitored by Socso.
The total LOE for all occupations is 81,217 while the available vacancies are 278,246 since January 2020.
For the PMET category, the available vacancies are double than the LOE – 95,453 versus 47,622.
Vacancies for professionals are the largest with 45,008, followed by technicians and associate professionals with 38,294 and managers with 12,151.
If we compare the LOE with job placement, we can see an imbalance between the number of vacancies filled and total vacancies in the labour market.
Job placement for PMET employees is only 63% or 30,209 of the total vacancies for PMET jobs (47,622).
The majority of the job placements comprises retrenched workers (62%) while the rest (38%) are fresh graduates.
At the individual PMET category, technicians and associate professionals register the highest placement rate with 75%, followed by professionals with 62% and managers with 49%.
In contrast, the employment placement for non-PMET exceeds the LOE, which makes this occupation category more efficient in the matching process.
There are two main factors that influence the low placement rate for PMET vacancies, namely wages and skill gaps between supply and demand.
1. Wages offered are not attractive
From the labour supply perspective, wage rates are the most important determinant for the acceptance of a job.
Labour supply for the whole market is predicted to be positively related to wage rates, and the market supply curve slopes upwards.
There are plenty of empirical evidence and data analysis that show relatively lower wages offered for PMET jobs. This situation explains the relatively lower placement rate for the PMET jobs.
The aim of a career is to create pathways and life-changing opportunities especially for youth graduates.
When salary and wages offered is too low, more graduates or highskilled workers opt for other alternatives to earn a better income such as short-term or freelance jobs in the gig economy, made possible with rapid technological advancement.
Let us examine the databases that provide evidence of the low wages for PMET jobs.
First, analysis of the 2018
Graduate Tracer Study database indicates that the majority (64%) of total graduates (92,527 people) earn monthly wages below RM2,000 (see Figure 4).
Given the current economic conditions, the relatively lower income paid to graduates is expected to influence the socio-economic welfare indicators such as cost of living and income inequality.
The situation is more serious as the real wages for graduates, after adjustment for inflation, show a decreasing trend (see Figure 5).
Short-term measure through market-driven and competency-based training
Although the nominal wages for graduates climbed closely in line with the rate of GDP growth in 2018 and 2019, the real wages grew relatively lower than the GDP growth, from 3.7% in 2018 to 3.6% in 2019.
Second, analysis of the MyFutureJobs database also demonstrates that the distribution of wages offered by firms is skewed towards the range of RM2,001 to RM3,000 (see Figure 6).
Specifically, 62% of job vacancies have a wage range of RM2,001 to RM3,000, followed by RM1,200 to RM2,000 (33% of job vacancies).
2. Different types of skills mismatch coexist in our economy
In market economies, product markets influence labour demand, and skill requirements are driven by employer choices in designing jobs (e.g. which tasks are delegated, which can be substituted by technology, which rely on non-routine tasks).
Candidates and potential employees also come to the labour market with varying knowledge, competencies and abilities that
can be broadly defined as “skills”, or the outcome of the individuals’ choices of education, training and their work experience, combined with innate abilities and preferences.
The process of matching diversely-skilled job seekers with available vacancies is not automatic. Imbalances between the supply and demand for people with different skills exist and are sometimes inevitable.
To illustrate this, Figure 7 distributes the number of graduates according to nine different fields of study in 2019, obtained from the latest Graduate Tracer Study. This information provides a good estimate of the supply for PMET occupations.
Figure 7 also details vacancies (demand) that are available in MyFutureJobs and classified according to the nine different fields of study.
There is also a huge gap between the supply and demand by fields of study.
On one hand, graduates in Social Sciences, Business and Law are the largest group with 101,845 people. On the other hand, vacancies available for this field as recorded by MyFutureJobs are only 7,628.
Meanwhile, graduates are highly demanded in Services with 18,957 vacancies.
Although the number of vacancies shown on the MyFutureJobs portal is only up to Sept 10, 2020, the total vacancies for the whole of 2020 would not be much different than the current pattern.
Figure 8 further details the job vacancies for the PMET category by ranking the top 50 occupations that are highly demanded in the market.
The highest demanded occupations are administrative assistant and commercial sales representative with 4,262 and 2,748 vacancies, respectively.
This labour market information is not only important for monitoring purposes but also highly relevant for the higher learning and training institutions in preparing market-driven modules of employability.
The Government has allocated large-scale training, upskilling and reskilling packages to address the immediate demand pressures.
At this juncture, it is important to ensure that the quality of the training, upskilling and reskilling programmes are safeguarded and targeted to the needs of the market.
The effectiveness of post Covid19 training does not only benefit short-term labour matching but us also likely to further stimulate long-term productivity growth.
Therefore, it is important for training providers to focus on job modules and programmes that are highly demanded in the market.
In addition, market-based information of the real-time data on job demands as such in Figure 8 is the essential dashboard for the training providers.
Short training courses should be developed to quickly equip displaced workers with the minimum skills needed to fulfil roles in top in-demand jobs.
Additionally, a competency-based approach in designing courses can reduce training duration by leveraging skills that the workers already have.
In the United States, the Rapid Skilling programme aims to transition displaced vocational and technical workers into current in-demand occupations using a competency-based approach.
Medium-term measure through the development of skill taxonomies
Although skill gaps between supply and demand may not be fully eliminated, there are several ways that better matching can be supported.
One of the effective ways is to use and strengthen the Labour Market Information (LMI) by establishing skill-occupation taxonomies.
The taxonomies are developed to facilitate graduates and students as well as guide the learning and training institutions on determining the required skills for specific programme-occupations.
To meet this need, Socso EIS is currently developing the MSOC, which is a classification of Malaysian skills, occupations, qualifications and competencies.
The MSOC is a bridge that connects the supply and demand of skills in Malaysia. Specifically, it connects jobs by supporting both employers looking to find the right candidates for their vacancies and jobseekers looking to find the right jobs for their skills.
Thus, it indirectly links employment to education by providing a market-driven labour market information.
This certainly helps provide education and training providers a better understanding of the labour market needs and revise their curriculum design accordingly.
Diploma holder a driver
Nur Hafizatul Nabila Mohd Fadzli, who holds a diploma in Multimedia and Dakwah, has been working as e-hailing driver since November 2019.
“Getting the right job with the appropriate salary is hard. After getting married, I have been working as a full-time e-hailing driver,” she says.
“This job is my main source of income. I am comfortable with this job as it offers flexible hours coupled with insurance.
“But my daily income has declined after the recovery movement control order. I have no choice but to work till late at night to cover my daily expenses.
“As a woman, it is challenging to pick up passengers at night. My personal safety is at risk but I have to put food on the table.
“Since the situation is affecting my savings, I hope to get a better job that commensurates with my qualification.”
Datuk Mohd Sahar Darusman is Chief of Employment Insurance Office, Socso