Ideas: Government should help the labour market

This article first appeared in Forum, The Edge Malaysia Weekly, on February 4, 2019 - February 10, 2019.
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The Ministry of Human Resources has released proposed amendments to labour legislation — namely the Employment Act 1955, Trade Unions Act 1959 and the Industrial Relations Act 1967. Many of the proposed amendments, which are now available for public comment, are significant for their potential impact on the business environment and labour market. In this article, I review of some of the proposed amendments and their possible effects.

Good steps: The proposed amendments expressing an explicit commitment to end any kind of discrimination on the basis of gender, race or religion are surely welcome. We hope they are implemented in their true spirit by the public and private sector alike.

Malaysia is one of the few countries, where women are not allowed night time work. The proposed amendments allow them to work late with a reasonable level of safety and security provided by employers. This will create additional job opportunities for women and increase productivity.

The amendments propose an increase of maternity leave from the current 60 days to a minimum of 98 consecutive days. Of course, employees will welcome this but, clearly, it will increase the cost of doing business due to the additional salary burden an employer will face.

Regressive steps: The proposed amendments to the Employment Act 1955 introduce a new section called “Pre-employment”. These amendments mandate that job seekers register with the government and for the private sector to seek government permission before organising job fairs. These amendments also oblige employers to inform the authorities about available vacancies. The intention is that once the information about supply and demand for labour is available, the government will help bridge the gap via coordination or by providing the unemployed with the proper training. These amendments are not desirable and, therefore, should be dropped.

The only positive and helpful role the government can play is to provide for vocational training for unemployed youth and, to this extent, the amendments are welcome.

The amendments also introduce a new section on flexible work arrangements. This is significant as the nature of the job market is changing and there is an ever-growing number of unemployed youth, or even employed youth, looking for part-time work arrangements. One major impetus has been provided by ride-sharing services, which provide an opportunity for every one to top up their income by driving a few hours a day.

The decision about what kind of flexible work arrangements can be successful should be left entirely to the mutual agreement between employers and employees. The government now wants to make this decision or heavily influence it. These amendments oblige employers, under certain circumstances, to approve such requests and empower them to deny such requests on the basis of any of the eight stipulated reasons as defined by the law.

The proposed amendments not only bind employees and employers to approval by the Labour Department, it subjects them to agreements with workers unions, thus restraining the freedom to work. The proposed amendments stipulate that any employer who refuses to allow an employee to move to a flexible work arrangement will be deemed to have committed an offence.

Malaysia is facing a significant labour shortage in the unskilled and semi-skilled sector in particular. The drive of the new government against illegal foreign labour has left many employers without a sufficient number of workers, thus forcing them to reduce production levels, which, ultimately, results in rising prices. And the fact that the hiring process for foreign labour remains complex and expensive, despite positive announcements, exacerbates the labour shortage.

Trade unions are an important part of the labour market, however, increased influence of trade unions may work against the interests of individual employees and employers. Proposed amendments to the Trade Unions Act 1959 may result in doing that. The current legislation grants a degree of discretion to the director-general whether or not to approve the setting up of a trade union, however, the amendments will make it obligatory for the director general to approve all applications to set up trade unions, including duplicative applications for different trade unions in the same firms.

We urge the government to conduct a thorough and meaningful consultation with the private sector, as well as an impact analysis, before legislating these far-reaching amendments to the labour regulations.


Ali Salman is CEO of the Institute for Democracy and Economic Affairs Malaysia

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