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Labor Market Reforms in Malaysia

Labor market is one in which workers find paying work, employers find willing workers and where wage rates are determined. Labor markets may be local, national or even international in their scope and are made up of smaller, interacting labor markets for different qualifications, skills and geographical locations. They depend on exchange of information between employers and job seekers about wage rates, conditions of employment, level of competition and job location.
The key fundamentals of an innovation-based economy are driven by human capital and innovation system. The key components of the human capital are driven by the labor force education level, the age of the labor force, the level of technology specific-skills acquired by the workers and the adoption of globally competitive educational policy in the domestic economy. The innovation system of the economy is driven by the level of research and development, the adoption of policies that are conducive to national innovation, and also by the level of infrastructure investments in new technologies. The effects of human capital and innovation systems are not mutually exclusive. There are strong complementary effects between human capital development and innovation systems, which are determined by the absorptive capacity of the domestic economy in terms of its human capital (the skilled level of workers) and the level of innovation and technological developments in the economy.
Contemporary immigration in Malaysia can be understood not only in the context of Malaysia’s high growth rates and the regional labor market, but its unique geographical location in the centre of Southeast Asia, its common borders and historical and cultural affinities with its neighbors Indonesia, Philippines and Thailand.
In the post independence phase 1957-70, there was rapid growth but unemployment was relatively high, reaching an official rate of 7.4 per cent in 1970.One characteristics of the Malaysian labor market was due to segmented internal labor markets and relatively open regional markets, due to geographical and historical links to neighboring countries, labor was imported even before an absolute labor shortage occurred. Even in the early 1970s several hundred Indonesians were reported to be working in rubber and oil palm plantations in Johor state in the south, and Thais were seasonally employed in sugar plantations in Perlis and paddy fields in Kedah.
Globalization, flexibility and changes in labor market reform have somehow affected the employment conditions of individual workers. Various studies have been undertaken to evaluate the effects of globalization and labor market reform on employment conditions of individual workers in terms of working time, work intensification, work organization, work family balance and health and safety.
These studies have found that the vulnerable groups such as part time, casual and foreign workers and non standard workers in the informal sectors are insecure under the current employment act due to the globalization and labor market flexibility.
In fact the Government policy in term of labor market reforms emphasized employment generating rather than protecting workers rights through labor legislation. 

Towards this end, attempts were made to achieve labor market flexibility through industrial relations legislation providing compulsory arbitration of disputes and prohibition of the right to strike in "essential services".

Last Updated on: 18-11-2009

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