Chapter 1: Economic, Monetary and Financial Developments in 2024

In 2024, labour market conditions remained supportive of growth. Employment grew by 2.6% (+423,800 persons; 2023: 2.8%, +439,200 persons) while the labour force participation rate continued to rise to 70.5% in 2024 (2023: 70%). At 3.2%, the unemployment rate has declined to below pre-pandemic levels (2023: 3.4%; 2019: 3.3%).

Services were the main contributor to employment growth, particularly within the wholesale and retail trade and food and beverages subsectors. Manufacturing employment growth moderated to 1% (2023: 1.7%), with domestic-oriented subsectors contributing a larger share of the sector’s employment growth. By employment status, own-account workers’ contribution to employment growth (2024: 0.6%; 2023: 1.1%) remains elevated and above pre-pandemic levels (2016–19 average: 0.4%). This may be due to the expansion of location-based gig work in areas outside of Klang Valley, which is associated to the continued growth of e-commerce activities driven by mobile penetration as well as technological advancement. On average, own-account workers tend to earn wages comparable to the median wage earned by their counterparts in conventional employment albeit not being covered by the social security system.^[10] Nevertheless, employees still represent the largest share by employment status, with strong growth in 2024 (2.5%; 2023: 2.1%), amidst resilient economic activity in the services sector. Semi-skilled workers were the main driver of employment growth by skill level (2024: 2.4%; 2023: 2.2%) and continued to account for the largest share of employment at 59% (2023: 59.1%). Meanwhile, high-skilled workers, accounting for 27.7% of employment, grew at a slower pace in 2024 (1.9%, 2023: 2.7%). To some extent, this reflected the existing issue of underemployment and skills mismatch, whereby 36.7% of employed persons with tertiary education have reported working in mid- or low-skilled jobs, which is higher than the pre-pandemic (2017-19) average of 32.7%.

The Social Security Organisation’s (SOCSO) Employment Insurance System (EIS) reported a total of 57,719 jobless claims in 2024, which accounts for approximately 0.3% of the total labour force. Similar to 2023, jobless claims primarily came from the manufacturing sector and wholesale and retail trade subsector of services.

The 2.6% rise in foreign worker participation during the year, was one of the main drivers for the increase in the labour force participation rate. The expansion in this segment was larger than the previous year (2023: 1.7%), as well as its long-term average^[11] growth of 0.5%, which points to the long-standing issue of over reliance on foreign workers amongstMalaysian firms. Another contributing factor was the growth amongst the 55 to 64 age group, whose participation rate grew by 1.6% due to workers electing to continue working for longer. By educational attainment, notable growth was observed amongst those with basic education. Both male and female participation rates remained positive in 2024, slightly rising to 83.4% (2023: 82.9%) and 56.6% (2023: 56.2%) respectively. However, at the current level, Malaysia’s female labour participation remains among the lower ones in the region.^[12]

Overall wage growth in the year has been modest with aggregate nominal private sector wages growing by 2.9% (2023: 3.8%), due to conservative wage setting behaviour among employers. BNM industrial engagements revealed several factors behind the cautious wage setting behaviour by employers. These include uncertainty with regards to minimum wage revision, concerns over the sustainability of demand and rising input costs. In addition, firms also retained a larger than usual workforce post-pandemic, which led to additional labour cost. This additional cost burden may have exerted downward pressure on wage growth during the year. The enlarged workforce reflected two factors. First, despite weaker external demand from 2023, firms continued to retain their workers due to concerns over cost of rehiring. This has led to slower hiring in 2024 despite the recovery in exports. Second, the expiry of unused foreign worker quotas in May 2024 prompted some firms to bring in more foreign workers to meet this deadline, further adding to the elevated labour supply.^[13] By sector, services wages grew by 3.6% (2023: 3.8%) which was driven by the wholesale and retail trade subsector, while manufacturing wage growth moderated to 1.5% (2023: 3.5%), driven mostly by export-oriented sectors (0.3%; 2023: 2.7%). On the other hand, public sector wage growth remained strong in 2024 (5%; 2023: 5.2%), in line with past years.

Labour productivity growth, in terms of real value-added per employment, improved significantly in 2024 (2.4%; 2023: 0.7%). The improvement was broad based across all sectors, and notably for manufacturing, productivity growth turned positive compared to 2023. Services productivity continued to grow (2024: 1.8%; 2023: 1.6%), while the construction sector recorded the largest improvement in productivity (16.5%; 2023: 4.9%) due to the higher amount of construction activity undertaken in 2024 while levels of employment was sustained. Despite recent growth in productivity, this has not translated to higher wages, which is a trend that has been observed post-pandemic. Cumulatively since 2019, productivity has risen by 5.3%, but real wage per worker declined by 1.9% within the same period.

Notes

^[10] Although it is not mandatory for own-account workers to participate in the social security system, they can voluntarily contribute to schemes such as Employee Provident Fund’s (EPF) i-Saraan and Social Security Organisation’s (SOCSO) Employment Injury Scheme

^[11] Refers to pre-pandemic average between 2016 to 2019

^[12] In ascending order of selected regional countries: Philippines (52.1%), Indonesia (54.7%), Malaysia (56.6%), Korea (63.5%) Thailand (68.4%), China (69.7%), Singapore (70.6%), Vietnam (75.4%), Japan (76.2%). (Source: International Labour Organization, ILO)

^[13] In the second quarter of 2024, employment of foreign workers increased by 125,600 compared to the previous quarter. (Source: Labour Force Survey, Department of Statistics, Malaysia)