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Foreign labour policy and employment in manufacturing: The case of Malaysia

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 in...

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Main Author: Devadason, Evelyn S.
Format: Article
Published: Taylor & Francis 2021
Subjects:
HA Statistics
HB Economic Theory
By region or country
Online Access:http://eprints.um.edu.my/26866/
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spelling my.um.eprints.268662022-04-18T02:30:00Z http://eprints.um.edu.my/26866/ Foreign labour policy and employment in manufacturing: The case of Malaysia Devadason, Evelyn S. HA Statistics HB Economic Theory By region or country 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. Taylor & Francis 2021 Article PeerReviewed Devadason, Evelyn S. (2021) Foreign labour policy and employment in manufacturing: The case of Malaysia. Journal of Contemporary Asia, 51 (3). pp. 398-418. ISSN 0047-2336, DOI https://doi.org/10.1080/00472336.2020.1759675 <https://doi.org/10.1080/00472336.2020.1759675>. 10.1080/00472336.2020.1759675
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic HA Statistics
HB Economic Theory
By region or country
spellingShingle HA Statistics
HB Economic Theory
By region or country
Devadason, Evelyn S.
Foreign labour policy and employment in manufacturing: The case of Malaysia
description 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.
format Article
author Devadason, Evelyn S.
author_facet Devadason, Evelyn S.
author_sort Devadason, Evelyn S.
title Foreign labour policy and employment in manufacturing: The case of Malaysia
title_short Foreign labour policy and employment in manufacturing: The case of Malaysia
title_full Foreign labour policy and employment in manufacturing: The case of Malaysia
title_fullStr Foreign labour policy and employment in manufacturing: The case of Malaysia
title_full_unstemmed Foreign labour policy and employment in manufacturing: The case of Malaysia
title_sort foreign labour policy and employment in manufacturing: the case of malaysia
publisher Taylor & Francis
publishDate 2021
url http://eprints.um.edu.my/26866/
_version_ 1735409468645048320
score 13.211869

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