The State of the Nation: Labour shortage spreads to service sector

This article first appeared in The Edge Malaysia Weekly, on May 9, 2022 - May 15, 2022.
The State of the Nation: Labour shortage spreads to service sector
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MALAYSIA’s service sector is feeling the brunt of a freeze on foreign workers. The struggle to meet orders for food, rooms and other services was evident as patrons made their way to shopping malls, hotels and dining outlets over the Labour Day cum Hari Raya long weekend.

Extraordinarily long queues formed outside busy restaurants while servers frantically sought to serve customers, who waited over an hour for their food. Diners lamented that the food was dismal and many dishes, unavailable, while many complained their hotel stay was marred by poor service and uncleaned rooms.

A major mini-market chain notified customers via Facebook of a reduction in operating hours due to a staff shortage. Retailers who are committed to new store openings are delaying their launches, while outlets which are typically manned by at least a dozen workers see only a few staff at work.

Foreign worker freeze, wage hike hurt service sector

While the collective sense of short-handedness reverberating through the service sector may be a result of pent-up demand after the end of Ramadan coupled with more than two years of containment measures owing to Covid-19, it is glaringly obvious that the freeze on foreign labour and unavailability of local workers are taxing service operators to the limit.

Employers in the service industry lament that employees who quit or were furloughed during the pandemic have set out to start their own businesses and are no longer keen to return to employment or their former lines of work.

In the personal care sector, salon owners are at a loss to fill the roles of assistants and other talents in training who left the business when the shops remained shuttered for months during the lockdowns.

In the hospitality industry, furloughed workers are believed to have found work in other industries offering a more steady income.

Hoteliers speak of local workers having found work in the manufacturing sector during the lockdown as those companies were considered essential services and many thrived.

“Workers were relatively well paid and could work overtime [for more income]. It is no surprise that they won’t return to work in the badly hit hospitality sector,” says Malaysian Association of Hotels (MAH) president Datuk N Subramaniam.

“Long have hotels relied on foreign workers for their operations, but until Putrajaya makes a concrete decision on this matter, the travel and hospitality industry will suffer,” he adds.

In addition, the minimum wage hike to RM1,500 starting May 1 is adding salt to the financially hurt hospitality industry. Like other sectors, the MAH petitioned for leeway in the form of incremental raises instead. However, there has yet to be a formal announcement on the matter, Subramaniam says.

He believes that a recovery in the hospitality sector will take at least three to six months pending Putrajaya’s further announcements of standard operating procedures and airlines’ explication of new travel pandemic-related criteria.

Despite the return of dine-in customers at food and beverage (F&B) outlets, food purveyors have not been able to fully capitalise on their long-anticipated return to profitability.

“F&B outlets remain open, but many are not able to cope with the busy crowds due to a shortage of kitchen staff and waiters. Diners need to wait longer than usual for their orders. Popular dishes are not available due to shortages of food supplies,” says Retail Group Malaysia managing director Tan Hai Hsin, adding that numerous F&B outlets have put up notices at their entrances informing the public of a staff shortage.

Typically, a salary increment might help employers to retain staff or attract new hires but workers now insist on their own terms of service.

Employers bemoan that higher pay is no guarantee of worker retention.

“Maintain her salary and risk an unhappy employee who will resign in search of a better offer, or give her a festive season salary advance and risk her taking flight immediately after. In over 30 years in the business of fashion retail and F&B, this is the worst I’ve seen of manpower issues as the younger generation of workers is not willing to work, if not on their own terms. Employers have to create additional shifts to accommodate workers’ needs for flexible working hours,” remarks Ivy Hew, CEO of F&B Connects Sdn Bhd, a network of over 200 local and foreign F&B players in Malaysia.

In search of better opportunities

Social media is now rife with promotional content of former employees-turned home chefs, caterers and suppliers of other household items.

In the US, business registrations picked up rapidly during the height of the pandemic, indicating a rise in entrepreneurship. If widespread resignations in the US is any indication that Malaysia might follow suit, economists say nay, the phenomenon is likely to be less pervasive here as “the lack of job security, absence of benefits such as medical and social security, and networking suggest that only those with the necessary experience, skills and financial independence, will be inclined to take the ‘independent’ career path”, says Dr Yeah Kim Leng, professor of economics at Sunway University Business School.

While the pandemic has enforced a shift in personal priorities and a desire for greater career independence, OCBC Bank economist Wellian Wiranto believes the unfortunate truth is that new ventures have a high failure rate, even though the phenomenon should nonetheless provide a [temporary] boost to the dynamism of the economy.

Meanwhile, social media posts tell of Malaysians desperately seeking work in Singapore now that international borders have reopened. This is happening amid news reports of worker shortage and supply chain blockages across the Causeway, which may well be a catalyst for Malaysians who hope to earn the stronger Singapore dollar.

The significant differentials in wages and currency exchange rate, coupled with the opportunity to gain invaluable work experience and expertise in an international centre, have long drawn Malaysians to Singapore. Those pull factors stand in sharp contrast against push factors back home such as low wages, insufficient job opportunities and relatively less favourable career prospects.

The current labour shortage notwithstanding, Malaysia’s labour market — with unemployment rate easing recently but yet to drop to pre-pandemic levels — is still slack, largely due to a mismatch between skills and jobs.

Yeah foresees that this slack labour market will tighten with the potential exodus to Singapore and other high-income countries in the region, but this will exarcebate the talent and skills shortages in the country, thereby hindering a faster recovery and a higher, medium-term growth trajectory.

“More critically, the shortage of skills could derail the country’s structural upgrading to a higher value, technology and innovation-driven economy,” Yeah foresees.

Persolkelly Malaysia managing director and country head Brian Sim believes that Singapore’s intention to attract higher-calibre foreign workers is part of the government’s broader push to boost local employment while positioning itself as a global city. Now with the borders opened, he foresees the number of Malaysians relocating to Singapore for work to progressively revert to pre-pandemic levels.

A study by independent think tank EMIR Research shows that the brain drain has been growing at an average rate of 6% per annum, with an estimated two million Malaysians living and working abroad as of September 2021.

“With more talent leaving in search of opportunities abroad, the remaining talent pool may face a shortage of supply, and this will lead to fierce competition in the job market. Organisations will also be challenged to hire suitable candidates to fill a headcount that requires highly specific skills,” Sim says.

As to what it will take for the service sector in Malaysia to revert to its pre-pandemic state, economists do not have an easy answer. It is believed that the shortage of unskilled labour can be resolved by loosening the intake of foreign workers.

“Such a stop-gap measure is evident in previous boom episodes and it will continue as long as automation and technological upgrading in the economy remains stunted,” Yeah explains.

“The service industries are undergoing sea changes due to the pandemic and ongoing digitalisation involving the adoption of 5G, Internet-of-Things, artificial intelligence, data analytics, blockchain and big data, among others, in varying degrees across all sectors and value chains of the economy.

“These knowledge and technology-intensive services will be the future waves of the services revolution with a long horizon. In the near term, the current slack labour market will tighten gradually in line with the pace of economic recovery,” Yeah says.

 

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