Labour productivity, value added per employment

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PETALING JAYA: Amid skyrocketing Covid-19 cases in Malaysia, various industry groups have spoken on the impact on businesses should stricter standard operating procedure (SOP) be implemented, with employment being a key concern.

Business chambers and manufacturers have been making known their worries that another round of strict movement restrictions would hurt businesses and reverse the economic recovery achieved over the past several months.

The economy slumped by 17.1% in the second quarter of 2020 following the imposition of the first movement control order (MCO) beginning March 18 last year. Nearly a year later, the country has yet to achieve a positive quarterly growth.

Economists are largely mixed on Malaysia’s growth forecast for 2021, although many of them predict an expansion closer to the lower-end of the central bank’s 6% to 7.5% forecast.

A slew of stricter SOP that can stifle operations of businesses and mimic the characteristics of the first MCO in March 2020 may force a downward revision of the growth forecast.

Even if a new MCO is only targeted at Selangor, considering its four-digit daily cases, experts said the national economy would suffer as the state contributes nearly a quarter of the country’s gross domestic product (GDP).

A stricter MCO that only allows selected essential businesses to run would also hurt the labour market, which already has a high number of jobless Malaysians.

As of March 2021, the Statistics Department said the unemployed individuals totalled 753,200 or 4.7% of the labour force. Nevertheless, it is noteworthy that the number of unemployed Malaysians have dropped from 782,500 individuals in January 2021.

Speaking with StarBiz, Center for Market Education CEO Carmelo Ferlito said any further lockdown will further stress employment.

“First of all, you have more businesses that will be forced to close and therefore will fire people.

“Secondly, you will have entrepreneurs that will go into a depressed business mood and will decide that it is not worth trying to keep on because policy is against them, and they will fire more.

“Finally, you will have multinational corporations moving to countries with better policies, such as Indonesia. And they will fire people too, ” he said.

Ferlito added that the most affected people would be the lower-ranking ordinary workers such as production staff.

He also pointed out that smaller-scale businesses, without the luxury of adequate cash reserves, will not be able to bear infinite days without revenues and yet incur operating costs.

Apart from unemployment, movement restrictions have also adversely affected labour productivity.

The growth of Malaysia’s labour productivity, measured in terms of value added per employment, has been in the negative territory for five consecutive quarters.

The worst decline was in the second quarter of 2020 when labour productivity shrank by 16% year-on-year.

Yesterday, the Statistics Department announced that the country’s labour productivity per employment declined by 0.4% in the first quarter of 2021. However, this represents an improvement from a contraction of 2.9% in the fourth quarter of 2020.

According to Chief Statistician Datuk Seri Mohd Uzir Mahidin, (pic below) this is the smallest decrease since the country’s labour productivity began to decline in the first quarter of 2020.

“During this quarter, Malaysia’s GDP contracted 0.5% while employment lessened by 0.04% to record 15.2 million persons. Hence, value added per employment in first-quarter 2021 amounted to RM22,516 per person, ” he said in a statement yesterday.

Meanwhile, in terms of labour productivity by value added per hour worked, Mohd Uzir said that total hours worked in first-quarter 2021 continued to drop by 0.9% as a result of the Covid-19 containment measures, recording a total of 8.5 billion hours worked.

“As a result, labour productivity by value added per hour worked rebounded to 0.4% with a level of RM40.20 per hour.

“Positive growth in labour productivity by value added per hour worked during this quarter following larger decline in total hours worked as opposed to marginal contraction in value added, ” he said.

Based on a breakdown by sectors, the Statistics Department said only the manufacturing sector continued to post an increase in labour productivity per employment for three consecutive quarters, rising by 5.9% in first-quarter 2021.

Labour productivity for the agriculture sector turned around to 1.6% from negative 0.7% in the preceding quarter.

On the other hand, labour productivity in other sectors continued to decline, namely, services (-2.6%), mining and quarrying (-3.7%) and construction (-8.2%).



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