Socso: Job losses increased by 42% in 1Q

Unemployment is anticipated to increase by 50%-200% YoY for each subsequent quarter in 2020


JOB losses in Malaysia rose 42% year-on-year (YoY) for the first quarter (1Q) and the trend is expected to accelerate for the rest of the year, according to the Social Security Organisation’s (Socso).

In a finding published by Socso’s Employment Insurance System (EIS) titled “Employment Outlook for the 1st Quarter of 2020: The Impact of Covid-19 on Loss of Employment (LOE)”, job losses is anticipated to increase by 50%- 200% YoY for each subsequent quarter in 2020.

“Because of Covid-19 which has led to many businesses experiencing a drop in demand (37%) or being unable to operate as usual (42%), this trend is only expected to accelerate from April 2020 onwards,” the report stated.

Socso also highlighted that the unemployment rate is forecast to hit 4%, compared to 3.2% during the 1997 Asian financial crisis and 3.7% during the Great Recession in 2018.

“Retrenchment figures are expected to be similar to those during the 1997 Asian financial crisis due to preemptive measures (Employment Retention Programme [ERP], and Wage Subsidy Programme [PSU]) taken by the government to prevent mass layoffs,” it said.

In addition, the youth unemployment rate has remained mostly steady between 8% and 11%, according to the report.

“However, they are the age demographic most vulnerable to retrenchment. The LOE data shows that 61% of job losses are among workers aged 40 and below, with 31-40 year olds accounting for 32% and workers under 30 making up the rest (29%).

“While male workers are more likely to be retrenched than their female counterparts (60% male to 40% female), this may simply reflect the fact that there are more men than women in the workforce,” the report stated.

The report also highlighted that out of 7.5 million active employees registered with Socso in 2019, 1.458 million worked in a tourism-related sector, while 1.457 million worked in manufacturing.

Socso added that it should therefore be no surprise then that over half of business closures occurred among large employers (over 200 workers) in the tourism sector, while the manufacturing sector retrenched the most workers (23% of the total) to reduce overhead costs after being forced to shut their factories.

State Demographic

In terms of demographic, 79% of all job losses occurred in five states, namely (in order) Selangor, Kuala Lumpur, Johor, Kedah and Penang.

Selangor, the first-ranked state, accounted for 32% of job losses.

“However, it should be noted that 30% of all jobs are located in Selangor, representing an increase of 6% from 2018.

“More concerning is Kedah, which accounted for one in six job losses despite being home to a relatively small number of employers,” the report added.

Job losses in Johor were mostly in the manufacturing sector (37%) and tourism-related industries (36%).

In most other states like Kelantan, Melaka, Negri Sembilan, Perak, Sabah, Selangor, Kuala Lumpur and Labuan, job losses were concentrated in tourism-related industries.

A few states deviated from that trend, including Putrajaya (ICT), Sarawak (construction), Pahang (other unclassified sectors), and finally Kedah, Perlis, Penang and Terengganu (all manufacturing), it said.

According to the report, on average, each employer had 15 foreign workers for each retrenched employee. The ratio was even higher in large companies with more than 200 workers, which had 69 foreign workers for each retrenched employee.

ERP, PSU Applications

The government has allocated RM14.05 billion in funding to the ERP and PSU programmes in addition to enhancing EIS benefits, in an effort to prevent retrenchments.

Socso stated that over 36,000 employers with 316,000 employees applied for the ERP, while 289,000 employers with 2.33 million employees applied for the PSU.

“PSU applications have indicated that 79% of businesses were unable to operate during the Movement Control Order and faced declining sales as a result. About 7% of companies are unable to sustain themselves for over six months on current reserves if the outlook does not improve soon.

“More than 90% of employers felt that their businesses were negatively impacted by the economic crisis linked to Covid-19. Among those, 93% felt that the measures taken by the government, eg PSU, were helping them to stay afloat,” it said.