JOB losses in Malaysia rose 42% year-on-year for this first quarter, according to the Social Security Organisation’s (Socso) employment Insurance System (EIS). 

In a report on the impact of the pandemic on employment outlook for Q1 2020, Socso said the virus outbreak had affected many businesses, with 37% reporting a drop in business and 42% unable to operate as usual.

“This trend is only expected to accelerate from April 2020 onwards, with job losses increasing by 50% to 200% year-on-year for each subsequent quarter in 2020,” it said in the report published today. 

The unemployment rate is forecast to reach 4% in 2020 compared to 3.2% during the 1997 Asian financial crisis and 3.7% during the Great Recession of 2018. 

Meanwhile, the retrenchment figures are expected to be similar to those during the 1997 Asian financial crisis due to pre-emptive measures of Employment Retention Programme (ERP) and Wage Subsidy Programme taken by the government to prevent mass lay-offs.

“The youth unemployment rate has remained mostly steady at 8-11%. However, they are the age demographic most vulnerable to retrenchment. 

“Data shows that 61% of job losses are among workers aged 40 and below, with 31 to 40-year-olds accounting for 32% and workers under 30 making up the rest at 29%. Male workers are more likely to be retrenched than female counterparts at 60% male to 40% female, this may simply reflect the fact that there are more men than women in the workforce,” it said. 

The report states that of the 7.5 million active employees registered with Socso in 2019, 1.45 million work in a tourism-related sector and nearly equal number in manufacturing. 

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

Employers who have yet to retrench staff are embarking on cost-cutting measures nonetheless.

“One of the most popular methods is to reduce salary, especially for employees who have been employed for more than five years as their salaries are typically 45% higher than those of shorter-tenured employees,” it said. 

At 41%, young employees aged 30 and below make up the majority of active employees registered with Socso, showing an increase of six% from 2018. Among them, 70% have less than two years of working experience.

On the other hand, the report mentioned the proportion of workers aged 40 and above who are registered with Socso actually decreased by four% in 2019. Among this group, 84% have served for more than two years at the same company.

Nearly 80% of all job losses occurred in five states (in order of magnitude) 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.

“Of more concern is Kedah, which accounted for one in six job losses despite being home to a relatively small number of employers. 

“Job losses in Johor were mostly in the manufacturing sector at 37% and tourism-related industries at 36%,” it said. 

In Kelantan, Malacca, Negri Sembilan, Perak, Sabah, Selangor, Kuala Lumpur, and Labuan, job losses were concentrated in tourism-related industries while in Putrajaya, they were in the ICT sector, Sarawak (construction), Pahang (other unclassified sectors), and Kedah, Perlis, Penang, and Terengganu (manufacturing).

“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,” it said. 

Selangor saw 6,128 jobs lost, Kuala Lumpur (4,959), Johor (1,457), Kedah (1,297), Penang (1,296), Sabah (1,183), Sarawak (845), Perak (727), Pahang (428), Malacca (284), Kelantan (196), Terengganu (171), Negri Sembilan (159), Perlis (55), Labuan (38), and Putrajaya (17).

The report also mentioned that in an effort to prevent retrenchments, the government has allocated RM14.05 billion in funding to the ERP and PSU programmes in addition to enhancing Employment Insurance System (EIS) benefits. 

PSU applications have indicated that 79% of businesses were unable to operate during the movement control order (MCO) 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 were helping them to stay afloat,” the report read. – Bernama, June 3, 2020.