Change policy to increase women’s employment

改变政策提高女性就业
夏伟文(Har Wai Mun) & 张龙翔(Chong Long Xiang) (24th Feb 2014)

In a 2004, Florence Jaumotte released a women labor force participation study report for Organization for Economic Co-operation and Development’s (OECD). She claimed that women choose between supplying labor service not only against leisure but also “home production”, which mainly consist of taking care of (young) children. In Asian traditions, this may even include responsibility to care for elder family members.

Taking analysis approach of “labor supply” versus “home production”, factors that affect women labor participation can be generalized into (i) tradition, (ii) technology, childcare and work condition, and (iii) policies.

Traditions Rope

Tradition is referred to activities or practices passed down from previous generations. In Asia, traditions tend to assigned home production like doing housework, taking care of children and elders to women. Generally, men are viewed as breadwinner, therefore commanded a relative superior standing to women. Malay tradition of Adat Temenggung and Chinese tradition of Confucianism give superior status to men in patriarchal family structure. Hypothetically, these put extra barrier for women to choose work over home production.

If traditions see home production as women’s duty, it also put extra opportunity cost for women if they choose it. How high this opportunity cost depends on how tradition thinking of the family are and how pressing is the needs for women to be available for housework. Higher the opportunity cost, higher salary enticement needed for women to choose working over home production. As a result, only single and/or highly educated female stand considerable chance to participate in labor market. Figure 1a that analyzes and plots data from Statistical Department of Malaysia may confirm it. The trend line in Figure 1a has an upwards slope, thus statistically implying a positive relationship between tertiary education enrollment and female labor participation rate. Nonetheless, Figures 1b shows a surprisingly negative relationship for secondary enrollment and female to male labor participation rate.

Common thought is that women work until they get married or luckier work until they have child. Perhaps, having at least a diploma or degree qualification is an exception. Otherwise, tradition is like a rope that tied down women to home production. Question is does Malaysia’s Economic Transformation (ETP) has plan to relieve traditions barrier for higher female labor participation rate?

 Figure 1a: Tertiary Education Enrollment vs. Female Labor Participation

Figure 1b: Secondary Education Enrollment vs. Female Labor Participation 

ETP does aims to create job opportunities for skilled labor. Projected new job creation for 2020 by qualification are 24% for vocational/certificates, 22% for diploma, 22% for degree, 7% for Master/professional and 3% for PhD. Jobs creation for unskilled worker is projected at 22%. However, no specific action plan targeted specifically to improve neither women education enrollment nor labor participation.

Technology, Childcare Service and Work Condition

Improvement in household technologies, information technologies and work condition are favorable factors to encourage female labor participation. Available of many home appliances and automation in affordable prices like washing machine, cloth dryer, auto vacuum cleaner and microwave have decrease time needed to perform household works. Commercial childcare center, which also provide early childhood education are available but may be unaffordable for the poor.

Early childhood education has been allocated two “Entry Point Projects” (EPP) in National Key Economic Area (NKEA) for education. Availability of foreign maids and/or elderly parents that can help to take care of some household work and childcare may help free up women to participate in labor force.

Information technology and increasing job opening of freelance, part-time and flexible work hour should greatly facilitate female participate in both labor market and home production.

Reforming Policies

Tax and childcare support

In term of tax, Malaysia does not have much encouragement to increase labor participation among women. Working wife can claim for personal relief of RM9000. If they did not work, the working husband can claim wife relief of RM3000. There is no relatively favorable tax treatment of second earners, which is given in countries like Austria, Czech Republic, France, Mexico, Portugal, South Korea, Spain and Turkey.

The more attractive motivation is the salary women can earn if they work. Therefore, tax policies should be reformed to (i) give favorable tax treatment for second earners, and (ii) ensure salary of Malaysian workers, particularly working mother is not being discriminated and high enough to beat cost of living plus extra expenses to take care of their household tasks. In addition, childcare subsidies could be given since there are empirical evidences from some research that claim its effectiveness. According to OECD Economic Studies No.37 (2003/2), child benefits increase the disposable income of families with two children. Countries with biggest increment include Hungary (21%), Austria (18%), Luxembourg (17%), Belgium (15%), Czech Republic (12%) and Germany (12%).

From company perspective, revenue expenditure incurred in providing childcare benefit to employee is deductible. This may encourage company provide childcare facilities but how many company has done it? To what extend the childcare facilities in the office can help working mothers? How about giving long maternity leave, parental leave and childcare leave to help women to reconcile work and family life? The same OECD studies reported variety degree of paid leave entitlement across its member countries. Countries that offer long paid leaves for mothers include France (73 weeks), Slovak Republic (59), Hungary (58), Finland (55) Denmark (42) and Sweden (40). Australia and United States do not have paid leaves while New Zealand only offers it recently. International Labor Organization suggested 14 weeks maternity leaves. In Malaysia, materiality leaves is 8 weeks only.

Public preschool

Availability of ample public kindergarten is also important to boost female labor participation as well as lessen the burden of poor citizen. Indeed, having national-wide free preschool education has been proposed by President of United States, Barack Obama in early 2013. He argued that poor family who cannot afford preschool for their children may put their children at a permanent disadvantage. Providing preschool also reduce the needs of women to take care of their child at home. Yet, free public preschool may be in conflict with ETP on education where private education institutions play big roles in every level of education. Solution could be as simple as government put a legal obligation for private education institutions, especially those preschool operators to offer certain percentage of intake places as free for the poor.

Flexible hour or Part Time Jobs

Flexible working hour arrangement, especially those jobs that can be work from home are getting more and more popular. A check through Wikipedia found some interesting information. In 2003, the United Kingdom government introduced legislation that gave parents of children under 6 years of age, or the parents of disabled children under 18, the right in law to request a flexible working arrangement from their employer.

Alternative to flexible work time is part time job. For women that have young children, working part time is preferable particularly if childcare is less affordable. There are no data for part time employment in Malaysia. For other countries, data from World Bank revealed higher percentage of part time job participation for women as compared to men. For a random selection of 22 countries, female part-time employment as percentage of total part time employment is over 50% (see Figure 2).

Figure 2: Female Part-time Employment (% of Total Part-time Employment) for 2010

Austria recorded 80.6% percentage. Among countries with high percentage include Switzerland (80%), Germany (78.7%) and Spain (76.2%). Part time job also has its disadvantage such as low job security, poor wages, no training and lack of other employment benefits and rights. Thus, any policy to encourage part time should come with plans to ensure proper working condition and human rights.

Conclusion

Women can be an asset to our economic growth if their labor participation is increase significantly. To achieve that, we need to change some of our traditions and reform policies.

[Chinese version published at Nanyang Press, 24th February 2014. Available online at http://www.nanyang.com/node/601914. This English version may be slightly different from the Chinese online/printed newspaper version]

Stagnation of female labour participation

女性劳动力停滞
夏伟文(Har Wai Mun) & 赵梅伊(Tiew Mei Yi) (17th Feb 2014)

In July 2010, United Nations Entity for Gender Equality and the Empowerment of Women (UN Women) is created. This is another milestone in current trend to empower women for gender equality. Non-governmental organizations (NGOs) that promote women’s rights are aplenty in both developed and developing countries including Malaysia. However, are women and men equal? Can women and men have equal role in the economy? Until now, these two questions have been discussed but not yet agreed upon any conclusive answer. Let’s begin reviewing it with some interesting statistics and trend findings.

Statistics and Trends

Various data on Malaysia and international employment are collected from World Bank’s database. Equivalent data by Malaysian states are sourced from Statistical Department of Malaysia. Analyzing these data through three categories, namely (a) labor participation, (b) education, and (c) unemployment reveal some interesting (or alarming) trends.

Labor participation

In term of labor participation rate in Malaysia, female rate is lower than male rate since 1990 (earliest data available date, see Figure 1). The highest different between these two labor participation rates is 39.5 percentage-points in 1998. However, encouraging sign is that the different is narrowing since 1998 to 33.1 percentage-points recorded in the latest year 2011, mainly due to declining of male labor participation rate (not shown in graph). For the period between 1990 and 2011, average rate for female labor participation is 43.5% while male is 80.2%.

We selected 22 countries randomly (and because of data availability) to do international comparative study. Malaysia’s female labor participation rate on average is lower than developed countries like United States (58%), Australia (55.1%), United Kingdom (53.9%), Singapore (52.8%), Germany (49.5%), Japan (49.5%) and South Korea (48.8%) as well as developing ASEAN neighbors of Thailand (66.2%), Indonesia (50.2%) and Philippines (49.4%) (see Table 1). Iceland even achieved an average female labor participation rate at 70.2%, which is an astonishing 26.7 percentage-point room for improvement for Malaysia.

Malaysian states that have highest female labor participation rate in 2010 (latest available data from Statistical Department of Malaysia) are Penang, Kuala Lumpur, Selangor and Sarawak. Meanwhile, states with relatively lowest rate are Kelantan, Kedah, Terengganu, Perak and Perlis. Coincidently or not, states with highest rate also recorded relatively higher GDP per capita and vice versa. These are shown in Table 2 and Figure 2 (top).

Figure 1: Malaysia's Labor Participation Rate

 

(Data source: World Bank database)

Table 1: International Comparison: Labor (Female) participation rate

No	Country	Average 1990 - 2011	2011
1	Iceland	70.2	70.8
2	Thailand	66.2	63.8
3	United States	58.0	57.5
4	New Zealand	57.7	61.6
5	Australia	55.1	58.8
6	Russian	55.0	56.3
7	United Kingdom	53.9	55.6
8	Italy	35.9	37.9
9	Portugal	53.1	56.5
10	Singapore	52.8	56.5
11	Netherlands	52.5	58.3
12	Indonesia	50.2	51.2
13	Hong Kong	49.6	51.0
14	Germany	49.5	53.0
15	Japan	49.5	49.4
16	Philippines	49.4	49.7
17	Korea, Rep	48.8	49.2
18	MALAYSIA	43.5	43.8
19	South Africa	42.1	44.0
20	Spain	41.8	51.6
21	Greece	39.8	44.8
22	Mexico	39.2	44.3

(Data source: World Bank database, blue=Asian, green=European, orange=others)

Scatter chart in Figure 2 (bottom), shows a positive relationship between female labor participation and GDP per capita. The linear trend line is slopping upwards. This implies that increase in female participation in the economy will help increase GDP per capita. However, do our policies and Economic Transformation Programs (ETP) put enough efforts to increase direct involvement of women in our economy?

Table 2: Top & Bottom States

Top States	Labor force participation rate (Female), 2010	GDP per Capita for year 2010 at Current Prices
Penang	56.2 (1st)	33456 (2nd)
KL	54.3 (2nd)	55951 (1st)
Selangor	52.2 (3rd)	31363 (4th)
Sarawak	50.0 (4th)	33307 (3rd)
Bottom States
Kelantan	41.7 (10th)	8273 (14th)
Kedah	41.3 (11th)	13294 (13th)
Terengganu	40.6 (12th)	19225 (10th)
Perak	40.2 (13th)	16088 (11th)
Perlis	34.8 (14th)	15296 (12th)

(Data source: Malaysia’s Statistical Department)

Figure 2: Malaysia's Labor (Female) Participation Rate & GDP per capita, 2010

 

(Source: Malaysia’s Statistical Department; GDP at current prices)

Education

Ratio of female to male tertiary education enrollment has never declined less than 100 levels since 1990 (see Figure 3). This implies that female enrollment in tertiary education has always been more than male. In term of secondary education, female to male ratio dropped below 100 level since 2007 but still hold above 97 levels. Therefore, female labor participation rate of never more than 50% as compare to male labor participation average rate of 80% has been shocking. Female labors have been just slightly more than half of male labors as indicated by the bar chart of “ratio of female to male labor participation rate” in Figure 3. These statistics shows that women do get equality (if not better) education opportunity relative than male. The mystery is why they participation in labor market is relatively so low?

Figure 3: Female-to-Male Ratio: Labor Force & Education 

(Source: World Bank)

Unemployment

Average female unemployment rate from 1990 to 2010 is 3.8% as compared to 3.3% for male. Female unemployment throughout that period is always higher than male except for year 1999 and 2003 as shown in Figure 4. Asian Miracle years from 1980s to 1997/98 Asian Crisis have greatly reduce unemployment rate for both female and male. Post Asian Crisis era not only keeping both unemployment rates between 3% and 4% but also has reduced the gap between female and male unemployment rates. While female has higher tertiary enrollment as compared to male, why their unemployment rate is still higher? Is it discrimination against women?

Figure 5 presents female unemployment in descending order for all 14 states (minus Labuan). Women unemployment rate is clearly higher than male in all states except for Kuala Lumpur, Johor and Kelantan. Kelantan recorded the second lowest female unemployment rate and is one and only state where male unemployment rate is higher than female. Highest female unemployment rate states for 2010 are Sabah (5.8%), Sarawak (4.7%) and Perlis (4.5%). Meanwhile, the states with biggest unemployment gap between genders are Perak and Pahang. While states of different size and development level like Melaka, Kelantan and Penang can achieve a low female unemployment rate, why unemployment rate in states like Sabah, Sarawak and Perlis can be twice as much?

Figure 4: Malaysia's Unemployment Rate by Gender (%)

Figure 5: Unemployment Rate by States, 2010

(Source: Malaysia’s Statistical Department)

Conclusion

While we are hearing hope upon hope for gender equality, actual statistic and trend revealed the darker side of reality. Malaysia’s female labor participation rate has been sustained around 43% without breakthrough improvement. This rate is still way below many developed and developing countries in the world. Education seems not a deterrent factor for woman to participate actively in our economy. Indeed, female has better enrollment ratio to male. Yet, statistics show that female unemployment is higher.

It is not true that non-working women (example, housewife) did not contribute to the economy. In contrast, it is important and beneficial that women play more active role and direct participation into the economy, particularly the women group with substantial education. They are the human capital for growth. Hence, more and more understandings and critical debates are still needed to realize the hope for gender equality in term of employment, opportunity and role to the economy. 

[Chinese version published at Nanyang Press, 17th February 2014. Available online at http://www.nanyang.com/node/600218. This English version may be slightly different from the Chinese online/printed newspaper version]

Can transformation close the gap?

转型能否弥合差距？
夏伟文 & 陈薛卉 (30th Sept 2013)

In less than seven years, Vision 2020 will reach its day of reckoning. The vision aimed to propel Malaysia to developed nation status by year 2020. After setbacks from few crises, particularly the Asian financial crisis 1997/98, can the country still reached its target? Economic Transformation Plan (ETP) has been formulated to help Malaysia to achieve rapid development. Yet, what are the gaps between now and our dream in 2020? 

ETP itself has three main targets, namely “high income”, “inclusiveness” and “sustainability”.

High Income Target

For the first target, it aims to achieve income per capita of USD15,000 or RM48,000 (thus, implying exchange rate of RM3.20 per USD being used). Based on World Bank’s benchmark estimation using nominal value and Atlas method, Malaysia’s latest income per capita for year 2012 is USD9,800, thus USD5,200 short of ETP minimum target.

Various projected growth rates from 2012 to reach the USD15,000 target in 2020 are presented in Figure 1. With ETP 6% growth per annum, Malaysia will reach the target. However, is the 6% projected growth rate too ambitious? Average annual growth rate from 1962 to 2012 (all available years in World Bank’s data) is only 4.21%. Taking a more recent estimation, average annual growth rate from 2000 to 2012 is even lower at 3.36% only. Both of these average growth rates will fail to make Malaysia a developed nation by 2020. The most optimistic approach is to take average rate on Asian Miracle years, namely between 1988 and 1996. The rate is 6.76% but do we expected those “miracle” will repeat itself now?

Figure 1: Projected GNI with Various Growth Rate

Another benchmark targeted by ETP is service sector accounting 65% of GDP. Based on data from Malaysia statistical department, service sector contribution to GDP fluctuated between 44.64% (lowest, recorded in 1998) and 52.37% (highest, 2001). Mathematically, service sector’s contribution need to increase at a calculated rate of 1.57 percentage points per year from its 49.31% in 2010. Historical trend from 1988 to 2010 recorded only an average growth rate of 0.17 percentage point per year. Service sector contribution grew most rapidly from 1988 to 2001. Yet, it grew a low average 0.5 percentage points per year. In the most optimistic view, only average annual growth for all positive years since 1998 yields a rate (1.68 percentage points) to achieve ETP target.

Figure 2: Projected Service Sector Contribution to GDP (Current Value)

Inclusiveness Target

ETP’s inclusiveness target aims to enable all Malaysian to enjoy the fruits of growth. In another words, it aimed to reduce inequality gaps. Focus will be given to households from lowest 40% income group. Based on World Bank’s data, the different between the forth 20% income group and highest 20% income group averaged around 31%. The same different between the first and second lowest 20% income groups is only averaged around 4%. Average income share held by lowest and highest 40% are respectively 13.64% and 72.84%, hence creating an average income share gap of 59.2%. Overall income disparity is shown in Figure 3 and Table 1.

Figure 3: Malaysia’s Income share Distribution

Table 1: Malaysia’s Income share Gaps Analysis

Year	Different lowest 20%  - second 20%	Different second 20%  - third 20%	Different third 20%  - forth 20%	Different forth 20%  - highest 20%
1984	3.81	4.61	7.13	33.82
1987	3.79	4.62	7.20	32.18
1989	3.78	4.57	7.04	31.49
1992	3.75	4.73	7.49	32.48
1995	3.78	4.72	7.44	33.39
1997	3.76	4.72	7.46	34.03
2004	4.35	4.77	6.79	22.41
2007	4.03	4.98	7.79	29.91
2009	4.11	5.07	7.92	29.81

After 1997, income share of the richest group has fall drastically to 22.41% in 2004, perhaps due to the Asian financial crisis. Note that no data available between 1998 and 2003. However, their share of income rose gradually toward 30% level in 2009.

In our previous article, we highlighted that “inequality” issue in Malaysia often narrowly focused on inequality between ethnic. Thus, no surprises that one of the Strategic Reform Initiatives (SRIs) in ETP, namely “narrowing disparity”, only aims to improve Bumiputera representation in market equity, employment, high value-added occupations, and management positions.

Yet, inequality should be viewed in wider scopes which include inequality between states and sectors. For example, agricultural sector only contributed 10.6% of Gross Domestic Product (GDP) in year 2010 as compared to manufacturing (26.1%) and services sector (32.3%). Besides commercial agriculture like palm oil and rubber plantation, income earned in this sector is relative lower.

In term of geography disparity, Malaysia Statistical Department estimated that in year 2010, Kuala Lumpur has the highest GDP per capita at RM55, 951. That is about 6.8 times more than Kelantan, the lowest at RM8, 273. Kuala Lumpur GDP per capita almost doubles Penang, the second highest state. Sarawak and Selangor come third and fourth highest.

Sustainable Target

One of the criteria for sustainable development is manageable debt level. Debt may be needed when saving is insufficient to reach needed investment level. Continuous threat of global recession has also prompted the government having deficit budgets, which are financed by debt. Yet, two questions are important. First, is the government spending prudent and necessary? Second, is the current debt level alarming?

 An analysis of operating versus development expenditure reveals ineffective government’s spending pattern. Based on data from Ministry of Finance, Figure 4 and Figure 5 show that operating expenditure is higher than developing expenditure except for year 2003. The gap is getting wider since 2003, averaging about 1.55 times for years between 2004 and 2012.

Figure 4: Operating versus Developing Expenditure

Figure 5: Operating – Developing Expenditure Ratio

High operating expenditure is burdening the government, thus public sector should be reduced in size but increase in efficiency. In addition, it is important that the Strategic Reform Initiatives (SRIs) of “Public Service Delivery” fully utilized information technology automation and reduce redundancy. It is good that PEMANDU revealed that a total of 49 licenses have been either abolished or identified to be abolished to reduce redundancy and create clear governance structure.

Under “Public Finance Reform” SRIs, ETP targets to reduce fiscal deficit to 3% of GDP by 2015 and near budget neutral by 2020. Can we achieve this target given the trend as shown in Figure 6? Since 2008, we have five consecutive years of deficit, the worst being in 2012 (latest available data year). 

Figure 6: Ratio of Budget Deficit (Surplus) to GDP

ETP Plan and Strategies

Increasing Gross National Income (GNI) is always main focus of ETP. It is necessary but not the only factor to enable equality and sustainability. Top six EPP from various NKEA are listed in Table 2.

Table 2: Top Six EPP Contributors of GNI

No	EPP	NKEA	GNI added in 2020 (RM million)
1	Attracting the right mix of internal & external talent	Greater KL/KV	118,212.1
2	Attracting 100 of the world’s most dynamic firms within priority sector	Greater KL/KV	41,440.5
3	Solar electronic (silicon, wafer & cell, and module producers)	Electronic and Electric	14,194.6
4	Improving energy efficiency	Oil, Gas and Energy	13,925.7
5	Pushing generics (healthcare) export opportunities	Healthcare	13,853.7
6	Increasing the (palm) oil extraction rate	Palm Oil	13,711.1

All EPPs have GNI target but Greater KL/KV NKEA seem to be obvious contributor. Therefore, will this help achieve economic balance between geography (states in Malaysia)? In addition to EPP, five economic corridors help to increase national income too but also in favor of Kuala Lumpur / Klang Valley and industry or service sectors. Exceptions are NCER that does focus on agriculture and “oil and gas” plans under ECER may benefit the two less developed states of Terengganu and Kelantan.

NKEAs such as modern agriculture, wholesale/retail, palm oil and tourism could help achieve inclusiveness if they give priority focus on rural or relatively less developed states in Malaysia. It will be better if micro-financing is included in Financial Service NKEA to fight poverty. In order for ETP to be success, some areas need to be considered too. For examples, ETP need to solve brain drain, corruption and wastage in economy.

Conclusion

In summary, time does not wait for anyone while uncertainty of global politics and economy pose danger to our economic dream to be developed nation by 2020. ETP may have it comprehensive plan to bring us there. Yet, can it bridge the gaps between now and targets level for 2020? More efforts certainly needed.

[Chinese version published at Nanyang Press, 30th September 2013. Available online at http://www.nanyang.com/node/567909. This English version may be slightly different from the Chinese online/printed newspaper version]