Foreign labour policy and employment in manufacturing: The case of Malaysia

Devadason, Evelyn S. (2021) Foreign labour policy and employment in manufacturing: The case of Malaysia. Journal of Contemporary Asia, 51 (3). pp. 398-418. ISSN 0047-2336, DOI

Full text not available from this repository.


The over-dependence of Malaysian manufacturing on unskilled foreign workers suggests the lack of policy alignment with the needs of the labour market. Despite the use of ``price restrictions'' (foreign worker levy and minimum wage) to control the demand for foreign labour, there are few indications of policy instruments having influenced the foreign employment growth rate. This article estimates industry-level foreign employment, paying attention to the roles of levy system, recruitment system and minimum wage policy, to provide a perspective on labour market administration. Using a panel data set of manufacturing industries for 1985-2014, upward revisions in the levy over the 1990s were found to be significant deterrents to the growth rates of foreign employment. The increase in levy in 2005 however failed to reduce this growth as it came in direct conflict with the introduction of outsourcing of foreign workers. The article suggests that with better policy co-ordination with supply-side instruments, a levy is a desirable instrument to align immigration with the objective of reducing foreign worker dependency. To appropriately price labour market needs, strict enforcement of levy payments by employers is recommended along with a fine-tuning for the existing levy to make it a multi-tier levy system for Malaysia.

Item Type: Article
Funders: Ungku Aziz Centre for Development Studies, University of Malaya [PD003-2017], European Union H2020 Framework Programme CP-2016 [N 770562]
Uncontrolled Keywords: Labour market policy; foreign workers; migrant workers; employment determination; manufacturing; Malaysia
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce > By region or country
Divisions: Faculty of Business and Economics > Department of Economics and Applied Statistics
Depositing User: Ms Zaharah Ramly
Date Deposited: 18 Apr 2022 02:30
Last Modified: 18 Apr 2022 02:30

Actions (login required)

View Item View Item