MIER National Economic Outlook Conference 2012

2
Modern jobs for the high-income economy
High paying jobs are skill-intensive jobs
Flexible labor markets
Unlocking Womens Potential
Outline
Traditional vs. Modern
Source: World Bank.
Traditional Modern
Simple, routine and standardized tasks Complex, analytical and differentiated tasks
High supply of low-skill labor that can
perform the tasks ! low wages
Tight supply of specialized labor and higher
productivity ! High wages
Most jobs in agriculture, labor-intensive
manufacturing
Most jobs in knowledge intensive tasks across
all economic sectors
Strict labor regulations make it difficult to
hire and fire workers, effectively placing the
burden of providing income security on firms
at the cost of lower efficiency
Flexible labor regulations reduce the cost of
hiring and firing and increase efficiency, while
effective social safety nets protect workers
Rigid job structures and expectations that are
not conducive to the participation of large
segments of the population, especially
women
Jobs that leverage on the entire stock of
human capital by making it easier and more
attractive for women to join the labor force
Competitiveness derived from institutions,
security of investments
Competitiveness derived from the quality of
human capital, in addition to good institutions
Employment grew at the same pace as the labor force, keeping unemployment low
Index, 1982=100
Source: DOS Labor Force
Survey Time Series Data,
1982-2010.
80
105
130
155
180
205
Employment (1982=100)
Labor Force (1982=100)
Labor markets have tightened recently
Unemployment rate (left
axis); Labor Force
Participation Rate (right
axis)
Source: Department of
Statistics, Malaysia.
61
62
63
64
65
66
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Unemployment Labor force participation rate
The share of the labor force with tertiary education increased
Labor force by level of
education, percent
Source: DOS Labor Force
Survey Time Series Data,
1982-2010
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tertiary
Secondary
Primary
No formal
education
7.3 pct CAGR
Most jobs created in the past decade have been high- or mid-skill
Net jobs created between
2000 and 2010, thousands
Source: DOS Labor Force
Survey Time Series Data,
2000, 2010.
Note: See full report for
explanation of skill levels.
910
826
37
0
100
200
300
400
500
600
700
800
900
1,000
High Skill Mid-skill Low-skill
But stock of jobs still mostly low-skilled
Number of jobs in 2010,
thousands
Source: DOS Labor Force
Survey Time Series Data,
2010.
Note: See full report for
explanation of skill levels.
Skilled agricultural
and fishery workers
Craft and related
trade workers
Plant and machine-
operators and
assemblers
Elementary
occupations
3,188
3,007
4,934
0
1,000
2,000
3,000
4,000
5,000
6,000
High Skill Mid-skill Low-skill
Malaysia is still seen as a low-skill, low-wage investment destination
Index, max=10
Source: A.T. Kearney and
World Bank staff calculations.
Malaysia
Malaysia
Malaysia
India
India
India
China
China
China
ASEAN*
ASEAN*
ASEAN*
Singapore
Singapore
Singapore
USA
USA
USA
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
Compensation
Business Environment
Exp. & Education
Enrollment rates still lag advanced economies
Gross tertiary enrollment,
percent
Source: World Bank EdStats.
0
20
40
60
80
100
120
1
9
9
0

1
9
9
1

1
9
9
2

1
9
9
3

1
9
9
4

1
9
9
5

1
9
9
6

1
9
9
7

1
9
9
8

1
9
9
9

2
0
0
0

2
0
0
1

2
0
0
2

2
0
0
3

2
0
0
4

2
0
0
5

2
0
0
6

2
0
0
7

2
0
0
8

2
0
0
9

Asean Median China
Malaysia Thailand
OECD Median Korea
The share of the labor force with tertiary education is middling
Share of the labor force with
tertiary education
Source: World Bank EdStats.
0
5
10
15
20
25
30
35
40
as are test scores, although regional differences are important
PISA Scores
Source: OECD.
350
400
450
500
550
600
OECD-Science OECD-Math
OECD-Reading Science
Math Reading
Non-routine soft skills are required for modern jobs
Source: Acemoglu and Autor
(2010).
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Skills for modern jobs
Upskilling labor force to perform non-routine skills within existing jobs agriculture, manufacturing, police
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Skills
Non-routine cognitive:
Analytical
Non-routine cognitive:
Interpersonal Routine cognitive Routine manual
Non-routine manual
physical
Analyzing
data/information
Establishing and
maintaining personal
relationships
Importance of
repeating the same
tasks
Pace determined by
speed of equipment
Operating v ehicles,
mechanized dev ices,
or equipment
Thinking creativ ely
Guiding, directing and
motiv ating
subordinates
Importance of being
exact or accurate
Controlling machines
and processes
Spend time using
hands to handle,
control or feel objects,
tools or controls
Interpreting
information for others
Coaching/dev eloping
others
Structured v .
Unstructured work
(rev erse)
Spend time making
repetitiv e motions Manual dexterity
Spatial orientation
Examples of occupations
demanding high levels of
these skills
Telephone operators,
book keeping, cashiers
Assembly line worker,
elev ator operator
Industrial truck
operator, security, food
preparation
Tasks
Lawyers, engineers, higher education
professionals, medical doctors, managers
Malaysias schools have limited autonomy compared to Korean peers
School autonomy at lower
secondary TALIS 23-country
study
Source: OECD (2009, Table
2.7) and World Bank staff
calculations.
Malasia
23 Country Rank
Malaysia Korea Talis Average of 23
1 Selecting Teachers 6.9 31.2 67.7 23
2 Firing Teachers 6.8 20.8 60.7 23
3 Establish Teacher Salaries 4.0 5.7 24.3 18
4 Determine Salary Increases 11.4 3.5 25.6 15
5 Professional Development 33.8 63.2 60.3 17
6 Formulate School Budget 68.8 77.3 75.3 17
7 Allocations within budget 62.5 94.9 88.2 21
8 Discipline Policies 56.7 56.7 93.1 23
9 Assessment Policies 21.6 91.1 88.9 23
10 Admission Policies 21.6 85.8 85.0 23
11 Course Offering 35.4 88.7 72.2 22
12 Course Content 33.3 85.4 65.7 20
13 Choosing Textbooks 19.0 96.7 90.0 23
Average 29.4 61.6 69.0 20.6
Firms generally identify non-routine and other soft skills as a key constraint
Percent of firms reporting skill
as a constraint
Source: Productivity and
Investment Climate Survey,
2009.
10
14
18
22
23
24
25
28
30
37
46
48
0 10 20 30 40 50
Teamworking
Social
Adaptability
Leadership
Time management
Numerical
Problem solving
Technical/professional
Creativity/innovation
Communication
English language
Information technology
The number of foreign workers quintupled between 1999 and 2008
Registered foreign workers,
thousands
Source: EPU
410
807
850
1,068
1,470
1,869
2,063
1,803
0
500
1,000
1,500
2,000
2,500
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Migrant workers partly replaced young Malaysians who went to university
Participation in the labor
force, percent
Source: EPU, CEIC.
4
8 8
10
12
12
15 15
16 16
14
14
24
23
22
21 22
21
20
20
19
19
18
18
0
5
10
15
20
25
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Share of Foreign Workers in LF
Share of 15-24 Year-Olds in LF
Can be helpful to correct market distortions if well-implemented
possible supervision-wage trade-off and increase in labor force
participation can outweigh unemployment effects at appropriate level
No panacea:
productivity growth key to sustained wage increases
not the best tool to address poverty, inequality, industrial upgrading
Implementation is key
predictable, evidence-based revision process
rigorous monitoring and impact evaluation
What is the role of a minimum wage?
Migration inflows respond to demand-pull forces
concentrate on addressing underlying factors for demand for low-
skilled labors by firms
in some instances high foreign worker inflows reflect positive
developments ! more young men in university
Additional options to increase the numbers of high-skilled
migrants
tap into foreign students already in Malaysia
improve livability of cities

Should there be a restriction in the number of foreign workers?
Sustainable path to higher wages is through greater productivity
linked to higher levels of skills
Structural reforms to ensure sustained demand for skills
more skills necessary but not sufficient for firms to upgrade
Towards more and better skills:
targeting underserved groups and areas can yield quickest gains
private sector involvement in skills provision
curriculum reform emphasizing soft skills
more autonomy and accountability for schools
Higher wages through more and better skills
Labor regulations generally flexible, but not uniformly
WEF rankings
Source: World Economic
Forum.
15
28
19
30
104
4
Cooperation in
labor-employer
relations
Flexibility of
wage
determination
Rigidity of
employment
index
Hiring and firing
practices
Redundancy
costs, weeks of
salary
Pay and
Productivity
Labor regulations generally flexible, but not uniformly
Termination benefits, weeks
of pay
Source: Doing Business.
Labor regulations generally flexible, but not uniformly
Legally mandated notice
period for redundancy
dismissal, weeks
Source: Doing Business.
High levels of job protection a sensible strategy for lower-
income countries
low capacity of government to tax and administer social insurance
Malaysia can achieve a better balance between job flexibility
and worker protection
ease regulations on retrenchment
implement unemployment insurance as part of broader safety net
Package of reforms: job flexibility without worker protection
socially unsustainable
Protecting workers rather than jobs
Gender equality is the right thing to do and smart economics
Gender gaps in lead to
Education
Reduced human capital stock in the economy
Employment segregation by sector and occupation
Home vs. Market work
Underutilization of human capital and talent
Sectors and occupations
Distorted allocation of talent (especially managerial talent)
Earnings gaps, which discourage women from entering the
labor market, reduce savings for old-age and spending on
children
MYS
10
20
30
40
50
60
70
80
90
100
4 5 6 7 8 9 10 11
Malaysias womens labor force participation is low
Female labor force participation rate, percent
GDP per capita,
logs
Source: World Development Indicators, World Bank staff calculations
Over 500,000 absent women could be contributing to the economy
Source: World Bank staff calculations
Estimated
FLFP (%) "Absent Women"
Regression (all countries) 52.3 504,169
Same level as Indonesia 53.2 576,419
Regression (excl. MENA) 57.0 896,881
Same level as Singapore 62.9 1,386,748
Same level as UK 69.3 1,921,397
Same level as Canada 74.2 2,330,738
4
8
16
0
2
4
6
8
10
12
14
16
18
Korea (FLFP=55%) Singapore (FLFP=60%) Sweden (FLFP=76%)
Significant gains from closing gender gaps
Potential gains in GDP per capita from raising FLFP to the levels of different countries, percent
Source: World
Development
Indicators, World
Bank staff
calculations
0
10
20
30
40
50
60
70
80
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Japan (2008)
Korea (2007)
Malaysia (2010)
Malaysias participation profile is single-peaked
Participation rate, percent
Source: ILO
Laborsta, CEIC
42
53
68
50
57
66
74
82
86
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1960s 1970s 1980s
Korea Malaysia
Singapore
Womens participation has increased with new generations, but gaps remain
Labor force participation of women 25-29, by birth cohort, percent
Source: ILO Laborsta,
CEIC
Education levels affect FLFP: 70% of women with higher education work

Labor force participation of women by educational level and age, percent
Source: Department of
Statistics, Labour Force
Survey, 2010
30%
40%
50%
60%
70%
80%
90%
100%
20-29 30-39 40-49 50- 55
no certificate/not
applicable
primary
secondary
post-secondary
tertiary
Womens gross enrolment in secondary education, percent
Higher secondary enrolment will help
Source: UNESCO
Institute for
Statistics
71
77
79
80 81
83
88
96
96
50
55
60
65
70
75
80
85
90
95
100
Married women are less likely to work

Labor force participation of women by marital status, percent
Source: Department of
Statistics, Labour Force Survey,
2010
82.4
97.3
88.0
91.7
69.5
48.9
57.1
78.4
0
10
20
30
40
50
60
70
80
90
100
Never married Married Widowed Divorced, separated
Male, (age 20-55)
Female, (age 20-55)
housework is the main factor for women being out of the workforce

Reasons for not seeking work
Source: Labour Force Survey
Women Men
Housework
Schooling
Going for further
studies
Increase secondary education enrollment
Flexible job arrangements
part-time work, flexible working hours, telecommuting
Better child care
increase the number of registered child care centers
allow for deduction of child care expenses from income
Men as a source of child care
What needs to be done to increase womens participation in the labor force?
The Malaysia Economic
Monitor is available for
download at

www.worldbank.org/my