April 2022 - Aisling Consulting

Unemployment Rate: More than Just Statistics

The recent labour force survey released by the Department of Statistics Malaysia revealed that Malaysia’s unemployment rate decreased by 4.1 percent in February 2022 (or 671,800 people), against January’s 680,400.

On the other hand, Hong Leong Investment Bank (HLIB) Research said that there are over 1.8 million tertiary educated Malaysians suffering from skill-related underemployment

Further, new graduates who joined the local job market have been receiving lower pay than in previous years, and in 2020, most were getting the absolute lowest salary allowed by law, according to Statistics Department’s chief statistician, Mohd Uzir Mahidin.

In 2020, 35.2 percent of fresh graduates earned between RM1,001 and RM1,500 compared to RM2,001-RM2,500 in 2019; an increase from 32.6 percent in 2019. For diploma graduates, those earning below RM1,500 have increased from 63.6 percent in 2019 to 64.3 percent in 2020.

Hence, it should not come off as a surprise that a sizable number of fresh graduates have turned to doing their own businesses, or even more popular, gig works that offer greater flexibility in terms of time while simultaneously providing them with better earning capabilities!

Having said these, Human Resources Minister Datuk Seri M. Saravanan recently said that Malaysians would rather become food delivery drivers, allowing them to earn more cash than join the 3D (dirty, dangerous, and difficult) industries, despite the government’s best efforts to put Malaysians first to fulfil shortages of manpower in these industries

The COVID-19 pandemic could have potentially changed the game for development in many communities, and for many workers and companies it seems to already have.

Are we, as a nation – employees, employers, the industry, and policy makers – coming together well and strongly to decidedly make and take short and long term measures to affect our local talent differently depending on their skill sets and businesses’ areas of economic activity?

This is certainly food for thought.

EPF Withdrawal: A Double Edged Sword?

On March 16, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that the government decided to allow contributors of the Employees Provident Fund (EPF) to make a special withdrawal of RM10,000 to ease the burden of EPF members who are still impacted by the Covid-19 pandemic.

According to EPF, the special withdrawal facility is open to all contributors aged below 55 years old. In addition to Malaysians, this facility is also open to non-citizens as well as permanent residents who are EPF members. Nevertheless, members must have at least RM150 in their EPF account at the time of application.

If members have previously applied for i-Lestari, i-Sinar, or i-Citra withdrawal initiatives, they can still enjoy this facility provided that they fulfil the requirements.

Reactions from policy makers, economists, and local financial experts have been mixed.

For EPF members who want to take out more money, this facility has come as a huge relief; easing their financial burdens. For members who do not need the money and chose not to take out their retirement savings in the past two years, they are not batting an eyelid. Further, earlier fears that members had of large withdrawals affecting dividends, have been quashed, thanks to the EPF’s 2021 stellar dividend rates of 6.1 percent for conventional savings, and 5.65 percent for shariah savings; both of which beat the 5.45 percent (conventional) and 5.0 percent (shariah) that were declared in pre-pandemic 2019.

The announcement of this facility was also welcomed by those who are not in a cash-tight position but are planning to utilise their withdrawals for various reasons such as a higher-return investment or kick start their own business.

However, EPF statistics in 2020 show that 70 percent of Malaysians outlive their retirement savings, and those who withdrew their funds at age 55, use up their savings less than a decade after retiring. This was before the pandemic – before any of the special withdrawals were allowed. Imagine the situation now, after almost four rounds of withdrawals.

An article on Cilisos demonstrated how much money an EPF member could potentially be losing out should they make the RM10,000 withdrawal, and it’s roughly RM37,500, due to the compounding interest. Truth to be told is, it is extremely difficult to find something low risk like the EPF that still gives you good annual returns, consistently.

While this withdrawal can help some people stay afloat longer, it is not a permanent fix. From raising the minimum wage, ensuring there are enough jobs in the market, and addressing the rising prices of essential goods, there are other steps that can be done, which would be able to better target the root of the matter.