Reference no: EM132879781

Think and Solve 1 Economic Outlook 2021: Labour market mismatch and gig economy

(https://focusmalaysia.my/top/economic-outlook-2021-labour-market-mismatch-and-gig-economy/)

UNDEREMPLOYMENT or education mismatch is defined as the under-utilisation of workers' education and skills. This is a long-standing structural issue faced by many countries including Malaysia.

Types of skill mismatch include skill gaps, skills obsolescence, over/under qualified or vertical mismatch, skills shortages, over/under skilling and field of study or horizontal mismatch.

The main reason for the mismatch is due to limited jobs available in the market to meet the growing number of labour supply.

Additionally, the labour market has become extremely competitive attributed to the increasing number of graduates every year which lead to job seekers accepting to be underemployed.

The issue of labour market mismatch must be addressed for Malaysia to harness the full potential of its human capital, acknowledges the Economic Outlook 2021 report. The issue should be addressed by both the demand and supply parties which include learning institutions, government agencies and industries.

Labour market is only able to offer sufficient jobs when the production structure of industries undergoes a rapid transformation into high-end production as envisaged in the industrial master plans.

In such case, self-employment can be a feasible alternative for job seekers and initiatives should be focused on generating more job creators through entrepreneurship opportunities.

Retrenchment surged in the first half of 2020 as the result of most economic activities being halted during the movement control order (MCO). Nevertheless, some industries such as online retail and delivery services benefited.

There was an increase in number of marts and restaurants migrating to the digital platforms as people could not leave their homes and purchases were made mostly online. This also saw a spike in demand for delivery services - the recruitment for food delivery workers and ride-hailing drivers increased.

It is undeniable that technology plays a crucial role as the enabler to make online marketplaces accessible.

The silver lining amid the COVID-19 pandemic is that it has brought changes to the employment landscape to short-term and more flexible employment from the traditional full-time employment.

The gig economy is a free market system, characterised by temporary job positions, flexible or freelance jobs with irregular income and working hours.

According to the Employees Provident Fund (EPF) in 2019, nearly 40% of the workforce would be gig workers in the coming five years, significantly higher than the global average of 20%. The main factors contributing to this surge is the rise of millennials and digital technology.

As those individuals grew up in the technological era and are more immersed digitally, millennials are not interested in the traditional economy which provides job security and permanent employment.

Based on an Informal Sector Survey Report by the Department of Statistics Malaysia in 2019, 1.3 million out of 15.6 million people in the labour force are in the informal sector (with 50.2% in the 25 to 44 age group). This reflects that a high number of millennials are into gig economy as it offers higher independence and work flexibility in line with their aspirations.

Embracing digital technology

Malaysians are among the most digitally connected in the world and produced some of Southeast Asia's most recognisable digital start-ups (World Bank, 2018). This is a result of the Government's effort in investing heavily on digital technologies.

Malaysian digital economy grew by 18.5% between 2015 and 2019 per annum; this year it is ranked 26th out of 63 countries in the IMD World Digital Competitiveness Ranking.

The workforce needs to be equipped with the required skills to support the gig economy as one of the new sources of growth in the country. Malaysia Digital Economy Corporation (MDEC) has embarked on the Global Online Workforce (GLOW) training programme with an allocation of RM25 mil to enable Malaysians to earn higher income digitally.

In addition, the Government has also launched myGIG Programme in June to support the participation of youths in the gig economy by providing appropriate training and supporting equipment.

Meanwhile, the Institutions of Higher Learning (IHLs) should move away from traditional methods by embarking on the teaching of basic skills to work independently, hence expanding career services to offer gigs and promoting online courses.

Issues and challenges

Gig workers do not have the advantage of job stability with regular pay and benefits. Also, there is no specific regulation, law or guideline to protect the welfare of gig workers except for provisions under the Self-Employment Social Security Act 2017 [Act 789] which require the self-employed to register and contribute under this scheme.

Also, gig workers are not legally covered under specific labour provisions which include minimum wage, working hours limitation, paid annual and sick leave as well as unfair dismissal. Furthermore, gig workers do not have financial safety nets such as pension and savings in the EPF.

Conclusion

The surge of the gig economy is attributed to the emergence of digital platforms that connects freelancers with businesses and the rise of millennials. Despite offering benefits particularly job flexibility, there are numerous issues that need to be addressed before gig economy becomes a source of sustainable growth.

Given its importance, the Government is considering new laws to regulate the gig economy, hence protecting the welfare of gig workers.

A committee comprising representatives from the Ministry of Human Resources, Ministry of Youth and Sports and Ministry of Domestic Trade and Consumer Affairs has been tasked to formulate long-term solutions to resolve various issues on the gig economy in the country.

The Government has also implemented several initiatives to ensure the development of gig economy. Moving forward, syllabus will be revamped, project-based learning will be incorporated and upskilling are needed to better prepare graduates for the gig economy. - Nov 06, 2020

Questions:-

1. Discuss FIVE (5) factors that contribute to the mismatch issue in the labour market.

2. Propose TWO (2) strategies to overcome the mismatch issue.