Unemployment rate on the rise


THE country’s unemployment rate is expected to increase within the next couple of months as more businesses are projected to opt for staff reduction from June onwards.

Putra Business School associate Prof Dr Ahmed Razman Abdul Latif said many companies are currently assessing their business performance right to May, while quite a number of enterprises would rather have the workers celebrate Aidilfitri first.

He said 610,500 unemployed persons recorded in March 2020 (equivalent to 3.9%) pose a serious problem because the number is higher than the one recorded during 1998 Asian financial crisis (3.43% in 1999) and US subprime mortgage crisis in 2008 (3.69% in 2009).

“Due to this, the government has to look into the issue immediately by focusing on micro data on specific industries that are greatly affected by the current economic crisis.

“Another fiscal stimulus package should be considered once the true situation on unemployment has been understood,” Ahmed Razman told The Malaysian Reserve.

He said the tourism and hospitality industries, including hotels, restaurants and tour operators, are among the most affected sectors that will witness more job cuts.

“The retail segment, transport and aviation are also heavily affected, especially during the Movement Control Order (MCO). Infrastructure and construction projects have been adversely affected as well.”

Around 23% of small and medium enterprises (SMEs) would have to downsize their businesses after the MCO, while 28% said they would restructure, according to a recent survey by the SME Association of Malaysia.

Only 19% believed that they would be able to resume operations as usual. The worst part — those who are not able to continue their business in the next three to six months will close down.

Last Friday, the Department of Statistics Malaysia (DoSM) revealed that unemployed persons increased by 17.1% to 610,500, compared to 521,300 in the same month in 2019, which reflects the negative impact of the MCO on the labour market.

Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the unemployment rate in March 2020 increased to 3.9%, the highest since June 2010 (3.6%).

“Unemployment rate (seasonally adjusted) in March 2020 also increased to 3.9% compared to 3.3% in the previous month,” he said in a report entitled “Labour Force in Malaysia” for March 2020.

The highest unemployment rate in Malaysia was recorded at 7.4% in 1986.

The “horrific” impact of the pandemic is further exacerbated following the introduction of the MCO on March 18 as non-essential businesses had to temporarily close down.

This is not only happening in Malaysia. The US economy lost 20.5 million jobs in April, the Bureau of Labour Statistics said last Friday — the most sudden and largest decline since the government began tracking the data in 1939.

Initial jobless claims in the US totalled 3.17 million in the week ended May 2, following 3.85 million in the prior week, according to a Labour Department report last Thursday. That brought the seven-week total to about 33.5 million.

Mohd Uzir said the working population in Malaysia in March 2020 was 15.23 million, of which 2.81 million were self-employed workers, including traders in markets and freelancers.

“These groups of workers were exposed to the risk of unemployment and work losses that affected their income during the MCO, partly due to being unable to work.”

For the first quarter of 2020 (1Q20), the unemployment rate in Malaysia increased to 3.5% compared to 3.2% in 4Q19 due to the sharp increase in the unemployment rate in March 2020.

The unemployment category for the youth age group of 15 to 30 years recorded the highest unemployment rate at 6.9%, followed by 31 to 45 years (1.4%) and 46 to 64 (1.1%) in 1Q20.

Former Human Resources Minister M Kulasegaran suggested that the government emulate the initiatives undertaken by Singapore, Denmark and Australia, where the countries attempt to support the economy and save as many jobs as possible.

These countries’ central banks are pumping a tremendous amount of liquidity into the financial system, including the use of bonds, he said.

He said the wage subsidy programme needs to be broadened to include mid-tier companies that employ more than 200 workers and the wage subsidy programme should be increased to 50% of the salary.

“The current RM600 per month is less than 10% of a company’s payroll. This is far too low compared to 70% to 80% wage subsidies offered by other governments around the world.”

Kulasegaran also said it is vital to set up parliamentary bi-partisan task force that could look into this issue and play a role in facilitating dialogue between employers, unions and other stakeholders, so that there could be a greater collaboration to mitigate unemployment.

A “Special Survey Effect of Covid-19 on Economy and Company/Business Firm” (Round 1) conducted by the DoSM showed 42.5% of companies polled will take more than half a year to recover.

The report showed 28.7% of respondents need an estimated four to six months to fully recover, while 1.9% of respondents stated their businesses will never recover and are expected to close.

DoSM surveyed 4,094 companies comprising micro (43.4%), small (40.4%), medium (9.1%) and large (7.2%) firms.

“68.9% of respondents used their own savings as the main source of support for operating costs/working capital throughout the MCO, followed by 19.8% through loans and 11.3% by capital injection.

“Two main assistances needed by the businesses are financial aid/subsidies (83.1%) and tax reduction (67%),” said DoSM in a statement.