More are self-employed as firms struggle to operate fully

The main takeaway from recently published data on unemployment rate in Malaysia is the number of people who are self-employed as companies are still struggling to reopen or to operate at full capacity.

“The high number of own-account workers or self-employed suggests that job opportunities in organisations and businesses may not be as quick as predicted,” says Ambank Research.

This is based on headline unemployment numbers. It is hardly unexpected given that many businesses are still reeling from the pandemic’s impact and are unable to operate at full capacity, it says.

The unemployment rate in January 2022 was 4.2 percent (4.2 percent in December 2021), the lowest level since March 2020, when the epidemic began.

The strengthening labour market trend was caused by a greater number of own-account workers than jobs produced. As a result, the number of jobless people declined by 7.3K, or 1.1 percent m/m, to 680K. (December 2021: 687K persons).

The labour force participation rate in January was 69.1% compared to 69.0% in December 2021.

Despite a drop in overall unemployment, youth unemployment (aged 15 to 24 years) remained high. Although it only accounted for 2.2% of the labour force, this segment of unemployment stood at a high double-digit of 13.2%.

Self employed segment

“An interesting point to note in our labour trend is that more people are moving into self employment.

“Using the number of own-account workers as a proxy for self employment, this segment grew by 0.6% or 16.0K persons to 2.66mil persons. They make up 16.2% of the labour force,” says the research firm.  

“Besides, the increasing level of uncertainties, the growing trend towards automation and advancement of technology, downsizing and relocation are other factors that could have contributed to slower job openings.” it says.

With job losses owing to the epidemic, as well as a continued imbalance between supply and demand for labour, as well as jobs taken up by foreign workers (legal and unregistered), locals are gravitating toward self-employment and openings in the gig economy,

And one of the difficulties of being self-employed, particularly when starting small firms, is competing with international labour.

They, too, are active in microbusinesses and are observed aggressively lowering costs in comparison to local company operators.

Local self-employed firms will suffer if this tendency continues without regulation.

Structural issues

While the unemployment rate is improving and could reach 3.8% in 2022, underlying structural labour market issues remain and still need to be addressed.

“January’s unemployment rate was unchanged at 4.2%, (4.2% in December 2021), the lowest level since March 2020 when the pandemic began. The labour market trend improved as was due to a higher number of self employed compared to jobs created by organisations and companies.

“While the unemployment rate is improving and could reach 3.8% in 2022, underlying structural labour market issues remain and these still need to be addressed,” analysts say.