Uncertainties linger on unemployment rate

Legal and technical definitions of employment and unemployment may need to be tweaked to include gig workers and those on unpaid leave, among others


THE surge in Employment Insurance System (EIS) and loss of employment (LOE) cases, as well as benefit claims that coincided with a moderation of the unemployment rate — from 5.3% in May to 4.9% in June — is making it harder for analysts to predict the nation’s current overall state of unemployment.

Yusof Ishak Institute’s Malaysia Studies Programme senior fellow and coordinator Dr Lee Hwok Aun said the preceding rising trend over three months was reversed, but it was inconclusive whether the figures in June is merely a one-off drop, stabilisation at a 5% plateau, or the beginning of a downward trend.

“EIS data indicated the possibility that unemployment worsens again, but if so, I would not expect a drastic change,” he told The Malaysian Reserve (TMR).

The unemployment rate improved to 4.9% in June, a 0.4% month-on-month decline from the previous month as the number of unemployed persons lessened by 52,900.

However, between May and June, the EIS registered a steep rise in LOE cases, which must be filed by claimants who are expecting assistance. The claimants comprised mostly professionals, technical workers and managers, who accounted for almost 60% of all LOEs.

Lee said these claimants probably earned above the RM4,000 wage subsidy threshold and the EIS would afford them temporary financial relief.

“However, the placement rate has also declined, from 45% in March to 21% in July.”

Lee said Malaysia has an established infrastructure for collecting and processing national statistics, and the practices strive to adhere to international norms.

“I generally trust the data, but we must read it critically and, if possible, check against other sources. We also need to put the numbers in context and be mindful of the limitations and the need for standards and consistency across time.

“Unemployment is simply defined as holding a job — any job — for at least one hour per week. We can also get information on full-time or part-time employment based on the number of hours worked.”

Lee added that the reduced job quality or status and lowered income are important issues.

“But we only add confusion and inconsistency to our monitoring of unemployment if we consider persons who move down the occupational ladder as unemployed.

“They may be displeased and anxious about the situation, but they are still employed,” he added.

Lee said the grid still used in Malaysia — employer, employee, own account worker (self-employed and working solo), unpaid family worker — is a bit outdated.

“I think it should be modified, although it is challenging because you risk losing continuity of the data series over time. But in the current scheme, Grab drivers would probably fall in their own account worker category.”

Economist Dr Nungsari Ahmad Radhi, while agreeing with Lee’s view, projected that unemployment in the country will worsen and will be the main problem going forward.

“I don’t expect there will be much job growth going forward in the next two quarters. We will have people losing jobs and new entrants into the labour market.

“So, unemployment will worsen although the GDP numbers may likely improve from the second-quarter numbers,” he told TMR.

He said Malaysia started with some 3% unemployment at the end of last year, while the labour market grew by about 3%.

“A 3% to 4% job loss will see unemployment coming close to 8% to 9%.”

Nungsari added that employment and unemployment have legal and technical definitions, as used by the Department of Statistics Malaysia (DoSM) to measure the quantum.

“What’s important is to recognise all workers in the count and as long as you’re in the formal sector, you should have (contributions to) Social Security Organisation (Socso) and the Employees Provident Fund (EPF) as some sort of safety net.

“You’re informal even if you’re still part of the labour force. You’re part of the denominator in the calculation of unemployment.”

PNB Research Institute CEO Intan Nadia Jalil said Malaysia might see some green shoots of recovery in the economy.

“Therefore, there might be an improvement in the employment rate throughout the rest of the year, provided that the Covid-19 situation remains relatively under control and no drastic public health measures such as another mass lockdown are imposed.

“According to Socso’s latest figures, LOEs dropped marginally in July, by around 10% compared to June,” she told TMR.

Intan said the DoSM’s labour force statistics are in accordance with international standards set by the International Labour Organisation. That allows comparison of the country’s main labour statistics with other countries.

“These international standards include the definitions of those who are employed and unemployed. For the former, this would involve the inclusion of gig and dirty, dangerous and difficult (3D) workers.

“I’m quite sure that employees who have been laid off and have not secured new positions during the reference week of the labour force survey are actually considered unemployed.”

As for those who had to “downgrade their professions”, there has been some discussion in economic and policy circles of the labour force in terms of measuring those considered “underemployed”.

“For example, those whose employment are deemed not commensurate with their qualifications, training and/or economic needs.

“Another statistical measure that could be considered is the inclusion, or a separate measurement, of employees who have been placed on unpaid leave, who would be considered employed, but whose absence of income would have an impact on considerations relating to labour and social safety net policies,” Intan added.

As for Malaysia’s labour force statistics in general, she said it would perhaps be more helpful for more robust research if more disaggregated and cross-tabulated data were made publicly available, such as the number of gig and 3D workers, as well as positions across different and more disaggregated sectors.