Informality and Informal Employment in Malaysia

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1 Informality and Informal Employment in Malaysia National Economic Outlook Conference November 2017 Hotel Continental, Kuala Lumpur

2 The Objectives... Informality and Informal Employment in Malaysia Challenges and Way Forward Other Related Statistics Characteristics Informal Employment Source: Informal Sector Workforce Survey Report 2

3 The informal sector... Plays a significant part, and increasingly so, in many developing countries Informal Sector Workforce Survey Report conducted by the Department of Statistics On what the right levels of informal sector should take in the economy? Studies informal employment in the context of Malaysia 3

18) Malaysia s Informal Employment Taken from the Informal Sector Workforce Survey (DOSM, 2015, p.

4 Concepts and Definition Informal Sector Based on the concept accepted by the 15th ICLS 1993 and 17th ICLS 2001 with reference made to SNA 1993 Informal Employment According to the Hussmanns (2002, p.18) Malaysia s Informal Employment Taken from the Informal Sector Workforce Survey (DOSM, 2015, p. 71) Informal employment: Cells 1 to 6 and 8 to 10 Employment in the informal sector: Cells 3 to 8 Informal employment outside the informal sector: Cells 1, 2, 9 and 10 4

5 Informal Sector in Malaysia is defined as All or at least one of the goods or services produced are meant for sale or barter transaction. The enterprise is not registered with the Companies Commission of Malaysia (CCM) or any other professional bodies, including the Local Authority (LA). The size in terms of employment is less than 10 persons and is not registered under specific forms of national legislation. Source: Baharudin, Othman, Che Pah, Chellamuthu and Musa (2011, p. 35) 5

6 Informal Sector is difficult to be measured... Nature Invisible Trend Unpredictable Size Small-scale Transition Gig economy 6

7 Based on the ILO, Informal Employment is own-account workers employed in their own informal sector enterprises employers employed in their own informal sector enterprises contributing family workers, irrespective of whether they work in formal or informal sector enterprises members of informal producers cooperatives employees holding informal jobs in formal sector enterprises, informal sector enterprises, or as paid domestic workers employed by households; own-account workers engaged in the production of goods exclusively for own final use by their household, if considered employed Source: Hussmanns (2002, p.18) 7

Across the World.. Informal employment as a percentage of total employment in 2015-2016 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.

8 Across the World.. Informal employment as a percentage of total employment in Albania Armenia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Malaysia Moldova, Republic of Occupied Palestinian Territory Russian Federation Serbia South Africa Thailand Malaysia s 11.4% is lower than many other countries SEA Data from : Indonesia, Philippines: about 60-70% Vietnam: 43.5% Thailand: 42.3% Informal employment in many developing countries remains largely significant 8

9 Transition of Malaysia s Economy Composition of Malaysia s Gross Domestic Product by Sector (%) e 2016p Agriculture Mining & Quarrying Manufacturing Construction Services Structural change of Malaysia s economy, from based on Agriculture to Services sector 9

10 Size of Informal Employment in Malaysia Growing at a slow rate 2010: Slight decrease as the economy recovers from 2009 s recession Informal employment as a percentage of total employment outside agriculture Labour participation rate Unemployment rate 10

11 Gender Distribution... Gender distribution of employment in the informal sector, Source: Informal Sector Workforce Survey, DOSM Men ('000) Women ('000) Men Women % 40.9% % 49.9% % 49.1% Gender distribution of total employment in Malaysia, Source: Labour Force Survey, DOSM Men Women % 35.2% % 35.8% % 36.3% % 37.4% % 38.0% % 38.2% % 38.4% Globally, a popular topic in informality women are always a majority Consistent fair share between the men and women in the employment in the informal sector Women had comparably higher share of employment than in total employment Franck (2012) suggested that many women do not wish to enter the formal sector because of familial responsibilities 11

12 Industry Distribution Share of employment in the informal sector in non-agricultural sectors by industry, Malaysia, (%) As a percentage of informal As a percentage of total employment in workforce in non-agricultural non-agricultural sectors sectors Industry Total Manufacturing Construction Services Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage Accommodation and food and beverage service activities Administrative and support service activities Human health and social work activities Other services industries Others

13 Type of Workplace Distribution Share of employment in the informal sector in non-agriculture sector by type of workplace, Malaysia, (%) Source: Informal Sector Workforce Survey, DOSM At home Factory/office/workshop/shop/kiosk/etc (independent from home) Market or street stalls No fixed location (mobile) Others * *Starting 2015, no Others categories are classified. Most common is at home and no fixed location 13

Occupation Distribution Share of employment in the informal sector in non-agriculture sector by occupation, Malaysia, 2013-2015 (%) Source: Informal Sector Workforce Survey, DOSM Managers and

4 Technicians and associate professionals 4 3.5 3.9 3.5 Service and sales workers 18.8 19.5 41.2 44.0 Craft and related trades workers 29.3 31.2 32.8 34.8 Elementary occupations 12.8 11.8 13.0 10.

14 Occupation Distribution Share of employment in the informal sector in non-agriculture sector by occupation, Malaysia, (%) Source: Informal Sector Workforce Survey, DOSM Managers and Professionals As a percentage of total employment in non-agricultural sectors As a percentage of informal workforce in nonagricultural sectors Technicians and associate professionals Service and sales workers Craft and related trades workers Elementary occupations Others Semi-skilled jobs dominated. Specifically, craft and related trades workers have the highest share of employment in informal sector. However services and sales workers have the highest share in the informal workforce. 14

15 Employment Status Distribution Share of employment in the informal sector in non-agriculture sector by status in employment, Malaysia, Source: Informal Sector Workforce Survey, DOSM Status in employment as a percentage of employment in total employment in non-agricultural sectors (%) Employer Employee Own account worker Unpaid family worker Status in employment as a percentage of employment in informal workforce in non-agricultural sectors (%) Employer Employee Own account worker Unpaid family worker

16 Educational Attainment Distribution Share of employment in the informal sector in non-agriculture sector by state, Malaysia, Source: Informal Sector Workforce Survey, DOSM No formal education; Tertiary; 8.6 Tertiary; 11.8 No formal education; 4.3 Primary; 23.1 Primary; 22.3 Secondary; 63.4 Secondary;

17 Distribution by State Share of employment in the informal sector in non-agriculture sector by state, Malaysia, 2015 Source: Informal Sector Workforce Survey, DOSM As a percentage of informal workforce in non-agricultural sectors As a percentage of total employment in non-agricultural sectors Total ( 000) 1, , Total (%) Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Pulau Pinang Perak Perlis Selangor Terengganu Sabah Sarawak W.P. Kuala Lumpur

18 Own Account Workers & Unpaid Family Workers 25.0% Possible second indicator of informal employment in Malaysia Also an indicator of informal employment in the formal sector, when it comes to own account workers 20.0% 15.0% 10.0% 5.0% 0.0% Own account worker and unpaid family worker Own account worker Unpaid family worker Informal employment (non-agriculture sectors) 18

19 Other Statistics Related to Informality Main statistics of informal employment, employment and B40 income in Malaysia Source: Informal Sector Workforce Survey, Labour Force Survey and Household Income Survey Report and Basic Amenities Report, DOSM Informal employment as a percentage of total employment outside Agriculture (%) Own account worker and unpaid family worker as a percentage of total employment (%) Labour participation rate (%) Unemployment rate (%) * Average annual growth rate of median income of B40 (%) Median income of B40 (RM) 1,345 1,440-1,847 2,537 2,848 * The Household Income Survey was not conducted in

Challenges & Way Forward Cost Survey is costly and seems redundant due

impact of informal sector to the economy More research needs to be

initiatives are e-rezeki, e-usahawan & 1Malaysia Support for Housewives

20 Challenges & Way Forward Cost Survey is costly and seems redundant due to small size Brings limitations to analysis process Research Possible impact of informal sector to the economy More research needs to be conducted Regulation Regulate transition to gig economy Among gov. initiatives are e-rezeki, e-usahawan & 1Malaysia Support for Housewives that provide incentives and training to increase income of informally employed 20

21 Conclusion Informal employment is small compared to other countries but still growing at a low rate There is an increase of informal workforce with tertiary education. Hence research and policy restructuration need to be conducted accordingly 21

22 REFERENCES Baharuddin, N. Othman, M., Che Pah, P.W, Chellamuthu, D., Musa, R. (2011). Informal Employment in Informal Sector Enterprises in Malaysia. Journal of the Department of the Statistics Malaysia, 2, Chen, M.A. (2012). The Informal Economy: Definitions, Theories and Policies. Women in Informal Employment Globalizing and Organizing. Department of Statistics Malaysia. (2005). Informal Sector Workforce Survey Report. Putrajaya, DOSM. Department of Statistics Malaysia. (2016). Household Income and Basic Amenities Survey Report. Putrajaya, DOSM. Department of Statistics Malaysia. (2016). Labour Force Survey Time Series Data. Retrieved 17th November 2017 from Franck, A. K. (2012). Factors motivating women's informal micro-entrepreneurship: Experiences from Penang, Malaysia. International Journal of Gender and Entrepreneurship, 4(1), Hussmanns, R. (2002). Defining and Measuring Informal Employment. International Labour Office, International Labour Office. (2002). Resolution Concerning Decent Work and The Informal Economy. Paper presented at the Ninetieth Session of Conference of the International Labour Organization. International Labour Office. (2013). Women and Men in the Informal Economy: A Statistical Picture Second Edition. Geneva: ILO. International Labour Office. (2017). Informal Employment. Retrieved 17th November 2017 from jspx?mbi_id=524&_adf.ctrlstate=17y8j6mai_4&_afrloop= &_afrwindowmode=0&_afrwindowid=null. Sethuraman, S. V. (1998). Gender, informality and poverty: a global review. Gender Bias in Female Informal Employment and Incomes in Developing Countries. Yusof Kasim, M., & Jayasooria, D. (2001). Informal economy, micro-finance and non-governmental organisations in Malaysia. Humanomics, 17(1),

23 Literature... is that a shift from the informal to formal is most helpful in the betterment of the economy. ILO retains this as their primary policy objective as a reduction in informal employment can lead to better and more decent work (Kucera and Roncolato, 2008; ILO, 2002) a study on informality is essentially to address the opportunities and incentives of informal workers and enterprises that are outside the formal structures governing taxes, workplace regulations and social protection schemes (Huitfeldt, Sida and Jutting, 2009) Higher focus on the informal sector will help study poverty and inequality, as many studies claimed strong links between informality, poverty and inequality (Chen, 2012) becomes a buffer for those who are unable to enter the formal labour market as they lose jobs or unable to find work suitable to their qualifications (ILO, 2013) 23

24 Thank You 24

National Employment Returns (NER) 2016

National Employment Returns (NER) 2016 National Economic Outlook Conference (NEOC) 2018-2019 November 2017 1 1 2 3 To update the profile of the Malaysian workforce To provide information on all categories