Foreign labour policy and employment in manufacturing: The case of Malaysia
Document Type
Article
Publication Date
1-1-2021
Abstract
The over-dependence of Malaysian manufacturing on unskilled foreign workers suggests the lack of policy alignment with the needs of the labour market. Despite the use of ``price restrictions'' (foreign worker levy and minimum wage) to control the demand for foreign labour, there are few indications of policy instruments having influenced the foreign employment growth rate. This article estimates industry-level foreign employment, paying attention to the roles of levy system, recruitment system and minimum wage policy, to provide a perspective on labour market administration. Using a panel data set of manufacturing industries for 1985-2014, upward revisions in the levy over the 1990s were found to be significant deterrents to the growth rates of foreign employment. The increase in levy in 2005 however failed to reduce this growth as it came in direct conflict with the introduction of outsourcing of foreign workers. The article suggests that with better policy co-ordination with supply-side instruments, a levy is a desirable instrument to align immigration with the objective of reducing foreign worker dependency. To appropriately price labour market needs, strict enforcement of levy payments by employers is recommended along with a fine-tuning for the existing levy to make it a multi-tier levy system for Malaysia.
Keywords
Labour market policy, foreign workers, migrant workers, employment determination, manufacturing, Malaysia
Divisions
economics
Funders
Ungku Aziz Centre for Development Studies, University of Malaya [PD003-2017],European Union H2020 Framework Programme CP-2016 [N 770562]
Publication Title
Journal of Contemporary Asia
Volume
51
Issue
3
Publisher
Taylor & Francis
Publisher Location
2-4 PARK SQUARE, MILTON PARK, ABINGDON OX14 4RN, OXON, ENGLAND