informality and informal employment in malaysia - mier · informality and informal employment in...

Informality and Informal Employment in Malaysia

Department of Statistics, Malaysia (DOSM) 21 November 2017 Hotel Continental, Kuala Lumpur

National Economic Outlook Conference 2018-2019

2 Department of Statistics, Malaysia (DOSM)

Informality and Informal

Employment in Malaysia

Source: Informal Sector

Workforce Survey Report

Informal Employment

Characteristics

Other Related Statistics

Challenges and Way Forward

The Objectives ...


The informal sector ...

Plays a significant

part, and

increasingly so, in

many developing

countries

On what the

‘right’ levels of

informal sector

should take in

the economy?

Studies informal

employment in

the context of

Malaysia

Informal Sector

Workforce Survey

Report conducted

by the Department

of Statistics


Concepts and Definition…

Based on the concept accepted by

the 15th ICLS 1993 and 17th ICLS

2001 with reference made to SNA

1993

Informal

Sector

According to the Hussmanns

(2002, p.18) Informal

Employment

Taken from the Informal Sector

Workforce Survey

(DOSM, 2015, p. 71)

Malaysia’s

Informal

Employment

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


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)


Nature

Invisible

Size

Small-scale

Trend

Unpredictable

Transition

Gig economy

Informal Sector is difficult to be measured...


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)


Across the World..

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

Albania

Armenia

Costa Rica

Dominican Republic

Ecuador

El Salvador

Guatemala

Malaysia

Moldova, Republic of

Occupied Palestinian Territory

Russian Federation

Serbia

South Africa

Thailand

Informal employment as a percentage of total employment in 2015-2016

Informal employment in many developing countries remains largely significant

Malaysia’s 11.4% is lower than many other countries

SEA Data from 2008-2010:

Indonesia, Philippines: about 60-70%

Vietnam: 43.5%

Thailand: 42.3%


Transition of Malaysia’s Economy...

0.0

10.0

20.0

30.0

40.0

50.0

60.0

1960 1970 1980 1990 2000 2010 2011 2012 2013 2014 2015e 2016p

Composition of Malaysia’s Gross Domestic Product by Sector (%)

Agriculture Mining & Quarrying Manufacturing Construction Services

Structural

change of

Malaysia’s

economy,

from based

on

Agriculture

to Services

sector


Size of Informal Employment in Malaysia…

8.0 10.0 9.3 9.2 9.7 11.2 11.4

63.1 62.9 63.7 64.5 65.6 67.3 67.9

3.3 3.7 3.3 3.1 3.0 3.1 3.1

2006 2009 2010 2011 2012 2013 2015

Informal employment as a percentage of totalemployment outside agricultureLabour participation rate

Unemployment rate

• Growing at a slow rate

• 2010: Slight decrease as the

economy recovers from 2009’s

recession

11

Gender Distribution...

• 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

Men ('000) Women ('000) Men Women

2012 616.7 427.3 59.1% 40.9%

2013 643.4 640.9 50.1% 49.9%

2015 714.00 689.10 50.9% 49.1%

Gender distribution of employment in the informal sector, 2012-2015 Source: Informal Sector Workforce Survey, DOSM

Men Women

2010 64.8% 35.2%

2011 64.2% 35.8%

2012 63.7% 36.3%

2013 62.6% 37.4%

2014 62.0% 38.0%

2015 61.8% 38.2%

2016 61.6% 38.4%

Gender distribution of total employment in Malaysia, 2010-2016 Source: Labour Force Survey, DOSM

Department of Statistics, Malaysia (DOSM)

12

Industry Distribution…

As a percentage of total employment in

non-agricultural sectors

As a percentage of informal

workforce in non-agricultural

sectors

Industry 2013 2015 2013 2015

Total 100.0 100.0 100.0 100.0

Manufacturing 9.2 9.6 16.0 15.9

Construction 19.9 22.1 19.5 20.6

Services 10.9 10.7 63.9 63.0

Wholesale and retail trade; repair of motor

vehicles and motorcycles 10.3 10.7 17.6 17.9

Transportation and storage 8.8 8.9 4.2 3.9

Accommodation and food and beverage

service activities 17.5 19.2 13.8 15.7

Administrative and support service

activities 12.8 10.7 5.5 4.8

Human health and social work activities 42.5 34.3 15.7 15.0

Other services industries 3.5 3.2 7.2 6.7

Others 1.8 1.5 0.6 0.4

Share of employment in the informal sector in non-agricultural sectors by industry, Malaysia, 2013-2015 (%)


13

Type of Workplace Distribution…

2010 2011 2012 2013 2015

At home 25.9 32.7 34.7 42.6 42.7

Factory/office/workshop/shop/kiosk/etc

(independent from home) 16.7 15 15.1 13.5 8.4

Market or street stalls 12.8 12.7 10.1 10.6 15.1

No fixed location (mobile) 42.2 36.8 38.7 31.8 33.7

Others 2.5 2.8 1.3 1.5 -*

Share of employment in the informal sector in non-agriculture sector by type of workplace, Malaysia, 2010-2015 (%) Source: Informal Sector Workforce Survey, DOSM

Most common is “at home” and “no fixed location”


*Starting 2015, no ‘Others’ categories are classified.

14

Occupation Distribution…

Share of employment in the informal sector in non-agriculture sector by

occupation, Malaysia, 2013-2015 (%) Source: Informal Sector Workforce Survey, DOSM

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.


As a percentage of

total employment

in non-agricultural

sectors

As a percentage of informal

workforce in non-

agricultural sectors

2013 2015 2013 2015

Managers and Professionals 2.5 1.6 3.7 2.4

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 10.6

Others 2.6 2.4 5.5 4.6

15

Employment Status Distribution…


Status in employment as a percentage of employment in

total employment in non-agricultural sectors (%) 2013 2015

Employer 7.0 6.0

Employee 2.9 2.8

Own account worker 62.2 55.1

Unpaid family worker 24.9 30.0

Status in employment as a percentage of employment in

informal workforce in non-agricultural sectors (%) 2013 2015

Employer 2.6 2.3

Employee 20.7 19.0

Own account worker 70.4 70.3

Unpaid family worker 6.3 8.4

Share of employment in the informal sector in non-agriculture sector by status in employment, Malaysia, 2010-2015 Source: Informal Sector Workforce Survey, DOSM

Department of Statistics, Malaysia (DOSM) 16

Educational Attainment Distribution…

No formal education;

4.9

Primary; 23.1

Secondary; 63.4

Tertiary; 8.6

No formal education;

4.3

Primary; 22.3

Secondary; 61.6

Tertiary; 11.8

Share of employment in the informal sector in non-agriculture sector by state, Malaysia, 2013-2015 Source: Informal Sector Workforce Survey, DOSM

2013 2015

Department of Statistics, Malaysia (DOSM) 17

Distribution by State…

As a percentage of informal workforce in

non-agricultural sectors As a percentage of total employment in

non-agricultural sectors

Total (‘000) 1,403.10 12,313.80

Total (%) 100 100

Johor 10.1 11.7

Kedah 8.9 6.2

Kelantan 12.2 4.5

Melaka 3.0 3.1

Negeri Sembilan 2.6 3.4

Pahang 4.8 4.3

Pulau Pinang 4.3 6.7

Perak 7.7 7.0

Perlis 0.9 0.7

Selangor 17.6 25.1

Terengganu 5.0 3.1

Sabah 11.4 9.3

Sarawak 7.6 7.4

W.P. Kuala Lumpur 3.7 6.9

Share of employment in the informal sector in non-agriculture sector by state, Malaysia, 2015 Source: Informal Sector Workforce Survey, DOSM

18

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2006 2009 2010 2011 2012 2013 2014 2015 2016

Own account worker and unpaid family worker

Own account worker

Unpaid family worker

Informal employment (non-agriculture sectors)

Own Account Workers & Unpaid Family Workers…

• 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


19

Other Statistics Related to Informality

2006 2009 2010 2012 2013 2015

Informal employment as a percentage

of total employment outside Agriculture

(%)

8.0 10.0 9.3 9.7 11.2 11.4

Own account worker and unpaid family

worker as a percentage of total

employment (%)

21.9 21.5 20.6 21.2 21.8 22.2

Labour participation rate (%) 63.1 62.9 63.7 65.6 67.3 67.9

Unemployment rate (%) 3.3 3.7 3.3 3.0 3.1 3.1

2006 2009 2010* 2012 2014 2016

Average annual growth rate of median

income of B40 (%) 6.7 3.4 - 8.3 15.9 5.8

Median income of B40 (RM) 1,345 1,440 - 1,847 2,537 2,848

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

* The Household Income Survey was not conducted in 2010-2011


20

Challenges & Way Forward…


Survey is costly and seems redundant

due to small size

• Brings limitations to analysis process

Possible impact of informal sector to

the economy

• More research needs to be conducted

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

Cost

Research

Regulation

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

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, 34-45.

• 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

https://www.dosm.gov.my/v1/index.php?r=column/ctimeseries&menu_id=NHJlaGc2Rlg4ZXlGTjh1SU1kaWY5UT09

• Franck, A. K. (2012). Factors motivating women's informal micro-entrepreneurship: Experiences from Penang, Malaysia. International Journal of

Gender and Entrepreneurship, 4(1), 65-78.

• Hussmanns, R. (2002). Defining and Measuring Informal Employment. International Labour Office, 1-18.

• 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

http://www.ilo.org/ilostat/faces/oracle/webcenter/portalapp/pagehierarchy/Page3.

jspx?MBI_ID=524&_adf.ctrlstate=17y8j6mai_4&_afrLoop=181767714525155&_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), 134-

140.



A popular view, especially among governments, is that a shift from the informal to formal is most helpful in the betterment of the economy.

…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)

Literature ...

Thank You


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