Employment Outlook

 
 

The national employment outlook appears lackluster as of April 2020, due to low business establishment rates, low hiring rates, and high retrenchment figures but also high retirement rates. The registration of new businesses declined by 47% across the country, with Putrajaya, which recorded growth of 30%, being the only exception. Hiring rates for local workers declined by 14%, in line with other regional economies compared to foreign workers, demand for which dropped by 56% month-on-month. The case for an economic slowdown is also reflected by LOE numbers, which increased by 17%. The only bright spot is the number of retirements, which increased by 3% month-on-month. The loss of these retiring workers may increase the chances of fresh graduates and current unemployed workers getting hired. For the purposes of this report, all employees aged 60 and above are assumed to have retired in line with the stipulations in the 2012 Minimum Retirement Age Act (Act 753).


According to the Harvard Business School Rock Center for Entrepreneurship, nearly 75% of startups fail in their early years. Startups with fewer than 20 employees tend to have a negligible effect on net job creation until they pass the 5-year mark, while startups with over 20 employees tend to have a positive employment effect as soon as they complete their first year. Other research indicates that larger small businesses and startups are “able to increase their level of productivity sooner after entry” than startups with fewer than 20 employees because they have better access to capital. As a result, they are in a better position to “challenge existing firms and increase the competitiveness of surviving existing firms” (Acharya, 2019). Are Malaysians starting new businesses during the COVID-19 crisis?


SSM statistics showed steep drops in March and April. Even in early May, such applications were still almost 53% down year-on-year. It is an early warning sign of how the crisis has negatively impacted business and job creation. States’ employment outlooks mostly reflect the national trend of slower growth. In total, 2,689 new businesses were registered, 40,533 new local employees were hired compared to foreign workers, which were 18,733 and 6,143 LOE cases were reported. Most of the new employers were based in Selangor (29%), followed by Johor and the Federal Territory of Kuala Lumpur at 11% each. The Federal Territory of Putrajaya and Labuan recorded the lowest number of new employers at less than 1% each. Among all states, only the Federal Territory of Putrajaya achieved net growth in the registration of new businesses. Sabah recorded the highest rate of decline at 79%, followed by the Federal Territory of Labuan at 70% and Negeri Sembilan at 68%.


As for new local hires, they were concentrated in Selangor (32%), the Federal Territory of Kuala Lumpur (27%), and Johor (11%). The Federal Territories of Putrajaya and Labuan recorded the lowest number of new local hires, at less than 1% each. However, despite Putrajaya’s small numbers, it was the best performer in terms of job growth as the hiring rate increased by 146%. With an increase of 36%, Kelantan was the first runner-up, followed by Terengganu at 16%. Hiring rates declined most steeply in Perlis (43%), followed by Sabah at 31% and Melaka at 23%. Of the 4,303 workers who are expected to retire, most are based in Selangor (27%), followed by the Federal Territory of Kuala Lumpur at 20% and Johor at 11%. Perlis, the Federal Territory of Putrajaya and Labuan recorded the fewest potential retirees at less than 1% each. Retirement rates increased the most in Negeri Sembilan (21%), followed by Terengganu at 15% and Sarawak at 13%. On the other hand, the Federal Territory of Labuan (50%), the Federal Territory of Putrajaya (31%), and Sabah (15%) experienced the highest decline in retirement rates.


LOE cases were concentrated in Selangor at 35%, the Federal Territory of Kuala Lumpur at 27%, Johor and Kedah at 7% each. On the contrary, Kelantan, Perlis, and the Federal Territories of Labuan and Putrajaya accounted for less than 1% of LOE cases each. The states which bucked the trend of increasing unemployment were Pahang, where LOE cases decreased by 36%, Sarawak (-25%), and Sabah (-20%). Foreign workers are mostly based in Selangor (30%), followed by the Federal Territory of Kuala Lumpur at 13% and Johor at 11%. Perlis and the Federal Territories of Putrajaya and Labuan recorded the fewest foreign workers at less than 1% each. The number of foreign workers declined in all states, with Perlis recording the steepest decline (98%), followed by The Federal Territory of Labuan at 82% and Melaka at 74%.