Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on October 30, 2017 - November 5, 2017

ALTHOUGH Malaysia registered higher productivity growth in 2016, it is still lagging behind the advanced economies, the Ministry of Finance says in the Economic Report 2017/18.

It notes that labour productivity increased 3.5% in 2016 and is expected to remain steady at 3.4% in 2017.

The construction sector recorded the highest productivity growth at 12.4% in 2016 while the mining and quarrying, and agriculture sectors registered increases of 11.3% and 3.4% respectively.

Meanwhile, productivity in the manufacturing and services sectors grew 1.4% and 2.8% respectively.

Although Malaysia lags behind advanced economies such as the US, Australia, Singapore, Japan and South Korea, overall productivity levels in Malaysia are better compared with those in China, Thailand, Indonesia and the Philippines.

The report also highlights that the productivity growth is at a slower pace despite Malaysia’s productivity level being higher than its peers’.

Interestingly, the report points out that the major challenges in boosting productivity are skills shortage and mismatches in the workforce.

“While the high-skilled workforce in Malaysia stood at 25.5%, it is lower compared with advanced countries such as Singapore (56.2%), Australia (45.2%) and the US (42.2%),” says the report.

Another issue highlighted by the report is that employers face difficulty in finding talent, primarily because of a lack of required soft and interpersonal skills.

It is worth noting that the country is facing a mismatch between supply and demand of graduates — where demand is greater than supply, especially in the ICT industry.

Unlike developed countries, the report says, Malaysia lacks structured channels of information for employers, skill providers and job seekers, which has led to a build-up of skills deficit and mismatches.

Other drags on productivity growth include the low adoption of technology.

“Malaysia was ranked 46th out of 137 economies in 2017 in terms of efficiency in adopting technologies to enhance productivity of industries,” says the ministry.

The low adoption of technology is also partly due to a large pool of low-cost, low-skilled foreign workers. This discourages employers from moving towards mechanisation and automation, thus hindering the country’s aspiration to shift towards a knowledge-based economy powered by skilled labour.

Where wages and salaries are concerned, the average monthly income of employees, based on the 2016 Salaries and Wages Survey Report by the Department of Statistics, increased 6.5% to RM2,463. In 2015, it rose 5.4% to RM2,312.

It is interesting to note that those with no formal education saw the highest increase in average monthly salary of 16.7%. This is followed by those with primary education (8.4%) and secondary education (5.9%). Employees with tertiary education saw the smallest increase of 4.9%.

By sector, the mining and quarrying sector saw the largest growth in average wages (14%), followed by the agriculture, forestry and fishing sector (8.9%), and the construction sector (8%). The manufacturing and services sectors registered the lowest average wage growth of 4.5% and 4.8% respectively, according to the survey.

Moving forward, the government is looking to intensify active labour market policies to enhance the employability of youth and unemployed graduates. Meanwhile employees will be encouraged to improve their competencies through upskilling and reskilling.

“These measures are expected to further improve the productivity of the workforce, resulting in higher compensation for employees,” says the report.

 

 

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