RETRENCHMENT exercises saw a significant increase in the first half of 2020 with 36,196 people being made redundant during the period, as firms embarked on downsizing to survive the economic impact of the Covid-19 pandemic.

The Economic Outlook 2021 report released by the Finance Ministry revealed that retrenchment increased considerably in the first half of the year, particularly in the tourism and manufacturing sectors, with many businesses winding up, downsizing and struggling with financial difficulties.

As a result of business closures and cost-cutting measures undertaken by firms, the number of unemployed people in the country rose by 30% to 670,200 people between January and June – pushing the unemployment rate to 4.3%.

“The labour market deteriorated in the first half of the year as economic activities were severely disrupted by the Covid-19 pandemic,” it said.

Although employment was still recording a positive performance with 71,300 new jobs created, the increase was marginal at 0.5%, which was lower than the growth of the labour force of 1.5%, it added.

During the period under review, the services sector was the largest source of employment at 63.3% of total employment, followed by the manufacturing and agricultural sectors at 16.8% and 11% respectively.

However, the negative impacts of the pandemic were also evident through other labour market indicators such as vacancies.

Job vacancies declined by 50.8% to 251,944 while the number of active job seekers increased by 16.9% to 277,840 people, of which 2% were new registrants.

Nevertheless, the labour market conditions are expected to progressively recover in the latter half of 2020, in line with a more favourable economic outlook.

The overall unemployment rate for 2020 is expected to fall to 4.2% with the creation of more job opportunities.

The number of employed people is expected to increase from 15.1 million to 15.3 million on the back of a strong domestic demand driven by sharp economic recovery.

Rise of the gig economy

Close to 40% of the Malaysian workforce would be gig economy workers in the next five years, the report said while citing a 2019 data by the Employees Provident Fund (EPF).

Gig economy jobs refer to freelancing or jobs based on short-term commitments instead of permanent employment.

This is significantly higher than the global average of 20%.

The rise of millennials and digital technology are attributed as the main reasons for the surge.

Many millennials are no longer interested in the concept of secure and permanent jobs, and those who grew up in the technological era, are also more “immersed digitally”.

Those aged between 25 to 44 make up for 50.2% of the 1.3 million workforce in the informal sector.

“This reflects that many millennials are opting out of the traditional workforce as the gig economy offers higher independence and flexibility in line with their aspirations,” it said.

The digital economy in Malaysia grew by 18.5% per annum, between 2015 and 2019. In addition to that, Malaysia also ranked 26th among 53 countries in the IMD World Digital Competitiveness Ranking 2020.

“Malaysians are among the most digitally connected in the world and produced some of the most recognisable digital start-ups.”

As digitalisation is the main enabler for the gig economy, the upsurge in digital platforms encourages more millennials to become gig workers and freelancers, the report stated.

There were 140 platforms providing gig and freelance opportunities to some 540,000 workers in Malaysia as of August 2020.

The report also highlighted the lack of employment and social safety nets as some of the disadvantages of gig economic jobs in Malaysia.

As gig economy workers are not formally recognised as employees, they are therefore not covered under specific labour provisions such as minimum wage, working hours limitation, paid annual and sick leave as well as unfair dismissals.

Unlike traditional employees, they do not have financial safety nets such as pensions savings in the EPF.

“In addition, there are still no specific regulations, law or guidelines to protect the welfare of gig economy workers except for provisions under the Self-Employment Social Security Act 2017, which require the self-employed to register and contribute under this scheme.”

The report also noted that close to 60% of more than 400 e-hailing and delivery drivers did not have savings for emergencies while 59% did not have retirement savings.

Future of the gig economy

The report, however, noted that Putrajaya was considering a law to protect gig economy workers.

A working committee comprising three ministries will formulate long-term solutions for the various issues surrounding the gig economy and to create a win-win situation for both employers and employees.

To equip the workforce with the necessary skills to support the gig economy – which has been identified as a new source of growth – training in areas such as software development and technology, creative and multimedia work, data entry and analysis as well as writing and translation will be required.

The Malaysia Digital Economy Corp (MDEC) has also received a RM25 million allocation to conduct training programmes that will allow Malaysians to earn higher income digitally.

“With the increasing number of graduates joining the gig economy, institutions of higher learning should move away from educating and preparing students for full-time employment.

“This traditional method does a disservice to graduates who will be ill-equipped and unprepared to succeed as independent workers in the gig economy,” it said.

Tertiary education institutes should instead focus on teaching basic skills such as working independently, expanding career services to offer gigs and promoting online courses.

“Reframing business school syllabus, such as learning how to be self-employed and running a business, will prepare students to work independently.”

The use of technology needs to be further accelerated to teach crucial skills, such as self-directed learning, effective communication, critical thinking, problem solving, collaboration and project management.

Apart from that, offering students career services to develop apps and websites will help them find short-term projects and applications. – November 6, 2020.