Wednesday, July 3, 2013

What’s Malaysia’s Full Employment Rate?

I honestly don’t know, but our new EPU head thinks its 4% (excerpt):

Parliament: 20 years of full employment, says Abdul Wahid

KUALA LUMPUR: The country's sustainable economic growth over the past 20 years has kept the unemployment rate at below 4 percent, which based on economic definition, is considered as full employment, Dewan Rakyat heard.

Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar said the good economic growth since 2011, from 5.1 percent to 5.6 per cent last year saw the creation of 438,800 jobs in 2012, compared to 385,000 previously.

"This means that the unemployment rate declined from 3.1 percent in 2011 to 3 percent in 2012," he said in reply to a written question by Mohamed Azmin Ali (PKR-Gombak)…

…However, opposition leader Datuk Seri Anwar Ibrahim (PKR-Permatang Pauh) felt otherwise and asked Abdul Wahid not to only read answers provided by his officers…

…Anwar claimed that the 3 percent unemployment statistic was unrealistic based on the assumption that there were about 80,000 unemployed graduates.

Assuming that it was a good rate was also inaccurate as those who were employed were in the under employment category.

Anwar’s question is valid – underemployment is something that isn’t tracked in the publicly available statistics, and is a potential qualifer to the unemployment rate. My own viewing of the employment statistics reveals a lot of statistical noise, which means that any month’s data is likely to have some error built in.

Nor can I verify the job creation claim. The monthly data from DOS indicates a net increase of 195k jobs for 2012 (737.4 for 2011). The figure given by Wahid may be gross job creation, but I don’t know.

There’s another potential fly in the ointment, such as how much of the labour force is actually active, i.e. the unemployment numbers specifically exclude those out of the labour force or are not looking for work. That’s why the unemployment rate should be read together with the labour force participation rate (LFPR), which indicates how much of the potential labour force is employed and looking for work, as a ratio to the total.

Here it’s pretty unambiguous:

01_lfprTo top (blue) line is the LFPR, the percentage of the total population of working age who are employed or who are looking for work. The bottom (red) line measures just employment as a ratio to the working age population. In both cases, the trend has been rising since 2010.

Whether or not you believe the official 3% rate, job creation and the number of people in work or looking for work has been rising the last couple of years. A bigger portion of the population has entered the labour force, and are actually finding jobs. Underemployment exists, but this is true anywhere and everywhere; it’s more a question of how much.

These and more questions really speak towards getting better statistics on the actual situation in the labour market, something Malaysia has been noticeably weak on over the years. With income and employment issues gaining interest, we really need an upgrade in terms of available data.


  1. If your LFPR and Employment-to-population ratio keeps moving , I think calculating the NAIRU seems pointless (as is the case in the US at the moment).

  2. Sustainable business modelJuly 4, 2013 at 6:51 PM

    The STAR reported today a Penang Muncipal Worker employed by the DAP State Government, still wearing his office T-Shirt was caught by a cop from China when he snatched the handbag of his wife.

    What does that tell you? Employment figures are rubbish..

    Is that Indian man on the motorcycle fully employed when he snatched the tourist handbag? Of course he is.

    Then why is he snatching women's handbag? Obviously he is not being paid enough by the DAP Penang Government.

    No one has reported a mercedes driving person who has a moonlighting job as purse snatcher.

    What is the point of 100% employment when the pay is so low that bag snatching is an obvious attraction despite the danger of being beaten up?

    It is just a red herring by Robber Barons in UMNO and the Govt. Malaysia employed 4 millions migrants illegal and legal so we are in a negative percentage. But wait a minute those are 600 ringgit jobs which qualify as no job at all.

    Wahid is finding out that he is regurtating meaningless figures.

    What is wanted is sustainable employment in sustainable business model. Not a slave salary model which no right thinking Malaysians want to do.

    So cut the crap. Malaysia is a wealthy country and we the natives should be live a lifestyle like the Arabs natives with our oil, tin, gold, you name it we got it.

    1. Like the Arabs?

      The unemployment rate in Saudi Arabia is officially 5.6%, but the underemployment is suspected to be much higher. Youth unemployment is five times as high, and women's unemployment is on the order of 50%. Foreign workers make up 30% of the population, and an even higher proportion of the labour force.

      The figures in other Arab countries are not much better, and in some cases considerably worse. Also, apart from the UAE and Qatar, every other country in the GCC ranks below Malaysia in corruption.

    2. I just checked the official data: Saudi Arabia's unemployment rate is distorted by the presence of foreign workers. The unemployment rate for Saudi natives is 12.1%.

      This is of course a rough estimate, as statistical capacity in the GCC is rudimentary and has only been built up comparatively recently.

    3. Rich Tanah MelayuJuly 7, 2013 at 9:18 PM

      The point here is that the unemployment figure for Malaysia is also distorted because of the low and poverty level salaries.

      A bus driver in Kuala Lumpur is only paid RM350 per month salary! That is why they stop whereever they want and pick up passengers as much as possible causing accidents and jams.

      So if you dicounted all the jobs below 1800 ringgit the unemployment rate is probably 30%.

      False unemployment figures breeds complacency while social issues like crimes breed in silence just like what the DAP Chinese government in Penang is doing.

      They invited Chinese investors to build expensive condos and billions ringgit tunnel while their own Municipal workers have to work as bag snatchers after office hours.

      They build gated housing to keep out those lowly paid people but for how long?

      The comparison with Brunei or Saudi is to emphasise that Tanah Melayu is as rich or richer than Brunei or Saudi.

      There shouldnt be lowly paid employee resort to stealing bags from women tourists.

    4. You're conflating poverty with employment but the two are completely different concepts. One is absolute, the other is relative. One does not invalidate the other. For example, the unemployment rate in the US is 7%, but the poverty rate is over 15%. Low unemployment and high poverty does not mean the employment/unemployment statistics are "distorted."

      BTW, the compensation for bus drivers in Malaysia curiously strange. Low salaries are pretty common, but this is not the same as take-home pay, as drivers are apparently typically paid based on their volume of work. The average overall compensation appears to be around RM2,000, and a hard working driver can make in excess of RM3,000. The very best, who can handle tourists, makes over RM4K.