Parasuraman 2007

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Globalizations, labour market reform and changes in employment conditions:

from the Malaysian perspective1
2
Balakrishnan Parasuraman
Abstract
Globalization, flexibility and changes in labour market reform have somehow affected the
employment conditions of individual workers (Yun, 2002; Lee & Woods, 2005). The arguments
about the effect of globalization and labour market reform on employment conditions have been
important issues in Asian countries, especially amongst those referred to as the South Asian
Tigers, such as Malaysia, Thailand, Philippines and Indonesia. This was particularly prominent
after the Asian financial crisis in 1997 (Erikson & Kuruvilla, 2000; Hadiz, 2002; Lee & Woods,
2005). The present research is based on the theoretical framework of Lee and Woods (2005) in
their paper on ‘Globalization, flexibility and changes in employment conditions in Asia and the
Pacific’.
In the context of Malaysia, there is a body of literature focusing on the effects of globalization
and labour market reform on wages, employment volume, income inequality and poverty (Ariffin,
1997; Erikson & Kuruvilla, 2000; Ramasamy, 2000; Rasiah, 2001; Yun, 2002; Nagaraj, 2004;
Parasuraman, 2006). However, none of these studies looks at the effects of globalization and
labour market reform on the employment conditions of individual workers in terms of working
time, work intensification, work organisation, work-family balance and health and safety matters,
particularly in the informal sector.
The current study uses qualitative methods to investigate the effect of globalization and
labour market reform on employment conditions of individual workers in terms of working time,
work intensification, work organisation, work-family balance and health and safety matters
particularly in the informal sector. Based on the qualitative data and secondary data sources, the
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research findings demonstrated that vulnerable groups such as part-time, casual and foreign
workers and non-standard workers in the informal sectors in Malaysia are insecure under the
current employment act due to the globalization and labour market flexibility. The situation of
employment conditions among the vulnerable groups and non-standard workers in the informal
sector is not very different if compared to formal sectors. The key issue is the lack of legislation
and policies to protect these workers from any victimization. The research findings also show that
currently there are no clear policy directions on minimum wage, retrenchment fund, part-time and
1 This paper is prepared as a background paper for the ILO project concerning “globalization and changes
in employment conditions in Asia” which was launched in spring 2005 and completed by the end of
January 2007.
2 Industrial Relations Program, School of Social Sciences, Universiti M alaysia Sabah (UM S), P.O Box 22144,
Luyang, 88781 Kota Kinabalu, Sabah, M alaysia. All communications should be sent to
drrusia@gmail.com
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casual workers and foreign workers although currently, there are many informal discussions on
these matters by the industrial relations social partners. Therefore, the major implication of the
study is that the three social partners (employers, trade unions and the government), through the
National Labour Advisory Council (NLAC), should jointly discuss the matters pertaining to
employment conditions in the informal sector.
1. Introduction and background of research
Globalization, flexibility and changes in labour market reform have some how affected the
employment conditions of individual workers (Yun, 2002; Lee & Woods, 2005). The arguments
on the effect of globalization and labour market reform on employment conditions have been
important issues in Asian countries, especially amongst the countries referred to as the South
Asian Tigers, such as Malaysia, Thailand, Philippines and Indonesia. This was a particularly
prominent issue after the Asian financial crisis in 1997 (Erikson & Kuruvilla, 2000; Hadiz, 2002;
Lee & Woods, 2005). The present research agenda draws from the analyses of Lee and Woods
(2005) in their paper on ‘Globalization, flexibility and changes in employment conditions in Asia
and the Pacific’. Lee and Woods (2005) argued that there is a need for comprehensive research on
the effect of globalization and labour market reform on individual workers, particularly from the
Asia Pacific countries. For example, Lee and Woods (2005:47) argued that:
rhetoric is abundant, while current knowledge is very limited both conceptually and empirically.
We believe that this gap is particularly serious for East Asia and the Pacific where globalization
has proceeded on an unprecedented scale. There is some evidence that ‘flexible’ employment
patterns are to a varying degree spreading and that employment conditions are often problematic.
Numerous policy measures have been taken to improve employment conditions for these workers,
but their actual impacts are unknown even in the industrialized countries in the region.
In the context of Malaysia, a body of literature focuses on the effect of globalization and
labour market reform on wages, employment volume, income inequality and poverty in Malaysia
(Ariffin, 1997; Erikson & Kuruvilla, 2000; Ramasamy, 2000; Rasiah, 2001; Nagaraj, 2004;
Parasuraman, 2006). However, none of these studies look at the effect of globalization and labour
market reform on employment conditions of individual workers in terms of working time, work
intensification, work organisation, work-family balance and health and safety matters particularly
in the informal sector.
The proposed International Labour Organisation (ILO) research will focus on the effect of
globalization and changes in employment conditions in Malaysia. It also aims to investigate the
changes of employment conditions for individual workers in the context of labour market reforms
and globalizations. The major elements of employment conditions will include: employment
status, wages, working time, work intensification, work organisation, work-family balance and
gender equality and health and safety issues.
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General objectives of this paper:
1. To describe the development of industrial relations and human resource policies in

Malaysia.
2. To examine the effect of globalization and labour market reforms on employment
conditions among vulnerable individual workers in Malaysia.
3. To evaluate current policy debates on globalization and employment conditions among
vulnerable individual workers in Malaysia.
2. Research Methodology
Primarily the researcher is planning to use multi-method, which include both quantitative and
qualitative approaches (Brewer & Hunter, 1989; Bryman, 2003). It is intended that the first phase
of data consists of quantitative data, which is mainly drawn from statistical data on labour force,
and time series micro-data set on employment conditions. However, there is insufficient
quantitative data on employment conditions among vulnerable workers.
From September to December 2006, the researcher visited many research locations such as
Department of National Statistics, Malaysian Employers Federation (MEF), Malaysian Trade
Union Congress (MTUC), Ministry of Human Resources and also private and public universities
to discover whether there is quantitative data in the form of time-series micro-data set on
employment conditions survey as a primary data source.
Based on the limitations of the quantitative data, the proposed research uses a qualitative
approach with multi techniques methods of data collection (Brewer & Hunter, 1989; Kelly, 1999;
Whitfield & Strauss, 2000; Bryman, 2003). These include semi-structured interviews with the
national industrial relations key players such as the President of the Malaysian Trade Union
Congress (MTUC), the Executive Director of the Malaysian Employers Federation, the Director
General of Industrial Relations, Ministry of Human Resource of Malaysia and university
academics who are involved in labour market and labour economic studies. Apart from that, the
Labour Force Survey Report 2004 (Department of Statistic, Malaysia), Annual Report 2005,
Manpower Department, Ministry of Human Resources, Malaysia, employment acts (new
amendments) and various government official documents were collected through the Ministry of
Human Resources, Economic Research Unit, Prime Minister’s Department, and main libraries in
the Klang Valley area, such as University of Malaya, Universiti Putra Malaysia and Universiti
Kebangsaan Malaysia.
The scope of study is divided into sections. First is the location of study. Figure 1
demonstrates the location of Malaysia on the world map, which has been selected by the ILO as a
research site. The justification of Malaysia was selected as one of the case studies under the ILO
project on employment conditions because it is one of the fastest growing economies in the Asia
Pacific region. Malaysia also played a vital role in regional economic integration, such as the
ASEAN Free Trade Area (AFTA), ASEAN plus three (Japan, Korea and China) and more
recently the involvement of Australia and New Zealand (Lee & Woods, 2005). Although
Malaysia has shown steady progress in its economy recovery plan and has been influenced
heavily by the globalization phenomenon since 1999, there are limited studies to look into the
impact of globalization on employment conditions, particularly on individual workers and
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informal sector. As Lee and Wood (2005) emphasized, this is the first study in the Asia Pacific
region to study the impact of globalization on employment conditions particularly on individual
workers.
Second, the scope of this study is focusing on the informal sector but most of the time, the
discussion in this paper also includes formal sector workers for comparative purposes. For the
purpose of this paper, Henley, Arabsheibani, & Carneiro’s (2006) and International Labour
Organisation (ILO) definitions will be considered. They defined the informal sector as ‘the
practice of defining informality in terms of the economic status of the individual (self employed or
own account worker, domestic worker, small scale employer) in conjunction with the
characteristic of the employers (small scale, no collective bargaining, contract of employment
etc) well established in the literature’ (Henley et al., 2006:6). Whereas ILO defined the informal
sector as based on number of employees in firms of either fewer than 5 or 10 employees
(depending on country).
The researcher spent about four months in Kuala Lumpur to undertake field studies. Kuala
Lumpur has been chosen as a location for study because most labour study centres such as
MTUC, MEF, Federation of Malaysian Manufacturing, Federal Ministries, and federal
government offices are located there. Data analysis in this study was based on the Miles and
Huberman’s (1994) approach. The discussion of research findings in this study is also supported
by other relevant literature on globalization and the impact on Malaysian workforce.
The next section will discuss the background of Malaysia from the historical, political,
cultural, and social perspectives. This facilitates the readers’ understanding of the contextual
factors and background of Malaysia as one of the fastest growing countries in the Asia Pacific.
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Figure 1. The location of study: M ALAYSIA
Malaysia
3. An overview of history, politics, cultural and social phenomenon in Malaysia
Malaysia is a federation of 14 States. These States are located in Peninsular and East
Malaysia (see map in Figure 1). The research study sites are located in the Federal Territory of
Kuala Lumpur (Peninsular). Malaysia's population of 26.5 million continues to develop at a rate
of 2.4 per cent per annum (Economic Planning Unit, Malaysia 2006). Malaysia’s population
includes many ethnic groups, with the politically foremost Malays comprising the majority. By
constitutional decree, all Malays are Muslim. About a quarter of the population is Chinese and
historically played a vital role in trade and commerce. Malaysians of Indian ethnicity comprise
about 7 per cent of the population and include Hindus, Muslims, Buddhists, and Christians.
About 85 per cent of the Indian community is Tamil. Non-Malay indigenous groups make up
more than half of the State of Sarawak’s population and about 66 per cent of the State of Sabah’s
population (Abdullah & Pedersen, 2003). They are divided into dozens of ethnic groups, but there
are commonalities in culture and lifestyle. Until the twentieth century, most practiced traditional
beliefs, but many have become Christian or Muslim. Although Bahasa Malaysia is the national
language, English is widely used in commerce and industry, and may be considered as a second
language. Other spoken languages include various Chinese dialects and Tamil. Population
distribution is unequal, with some 15 million residents concentrated in the lowlands of Peninsular
Malaysia (Ghosh, 1998).
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The written history of Malaya prior to European control is sketchy. Until the fourteenth century,
it was mainly under the political benefaction of the Siam, Sumatra and Sulu Sultanate. Malacca
extended its power into other States of Malaysia in the fifteenth century but was limited by the
incursion of European colonial rule in the 1511 (Periasamy, 2000). Britain controlled the political
and social chaos to their advantage and extended their area of influence into Malaysia in 1824
(Abdullah, 1991). Furthermore Britain exploited the natural resources of Malaya and encouraged
the commercial development of plantation crops. To drive this economic development, Asian
immigrants, especially Indians and Chinese were encouraged to migrate and work in mining,
plantations and infrastructure developments (Ramasamy, 1994; Fong, 1999). This created a multi-
ethnic population in Malaya from the nineteenth century (Gamba, 1962). With vast experience as a
colonial power since the fifteenth century, the British enforced a policy of ‘divide and rule’ which
separated the Malay, Chinese and Indian ethnic groups into different economic sectors. For
example the Malays normally concentrated on rural agriculture, the Chinese focused on mining
industries while the Indians were kept in the rubber plantation sector. Through this segregationist
policy, the British believed that their economic prosperity would be ensured and at the same time it
would subduethe political aspirations of the locals (Gullick, 1958). To ensure this system worked,
each ethnic group was settled in a specific settlement away from the other ethnic groups. Thus, the
British created localized ethnic settlements within Malaya, enabling the Chinese and Indians to be
economically productive. This created an ‘earn and return to homeland’ mentality among the non-
indigenous ethnic groups such as Chinese and Indians.
The Japanese occupation of Malaya in 1942 brought about a psychological revolution among
the diverse ethnic groups in the country (Gullick, 1958). Malayans acknowledged their own
abilities and the substance of unity, and began to collaborate to work against their British colonial
master. The Japanese contributed to this by promoting the notion of’ ‘Asia for Asians’ and also
promoted political ideologies among the Indians and Malays (Joginder, 1970). The return of the
British with the Japanese surrender in 1945 brought political altercation to the forefront. The people
began forming associations and political parties, agitating in main cities for their rights, with the
support of Sultans (from the various States). This action culminated in the independence of Malaya
in 1957. In 1963, Malaysia was formed as Sarawak and Sabah achieved independence from the
British and joined Malaya.
Malaysia is a constitutional country with a democratic political structure, technically headed

by the Yang di-Pertuan Agong ‘paramount ruler’, regularly referred to as the King. Kings are
elected for rotational 5-year terms from among the nine sultans of the Peninsular Malaysian
States. The King also is the leader of the Islamic faith in Malaysia. Executive power is vested in
the cabinet led by the Prime Minister. The Malaysian constitution stipulates that the Prime
Minister must be a member of the lower house of parliament who, in the opinion of the Yang di-
Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members
of both houses of parliament and is responsible to that body. The bicameral parliament consists of
the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). These are
democratically elected.
Barisan Nasional (National Front) is a political alliance based on the multiracial composition
of the country. It consists of fifteen diverse parties and has governed since independence.
Nevertheless, the three main political parties in the coalition government are the United Malayan
Nation Organization (UMNO) representing the Malays, the Malaysia Chinese Association
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(MCA) representing the Chinese, and the Malayan Indian Congress (MIC) representing the
Indians. There is also an opposition, represented by the Malaysian Islamic Party (PAS) and the
Democratic Action Party (DAP). The principal supporters of PAS are mainly Malay Muslims
concentrated on the East Coast (Kelantan and Terengganu) whereas the principal supporters of
the DAP are mainly of Chinese origin.
Legislative power is divided between the Federal and State legislatures. The Malaysian legal
system is based on English Common law. The Federal Court reviews decisions referred from the
Court of Appeal. It has original jurisdiction in constitutional matters and in disputes between
states or between the federal government and a State. Peninsular Malaysia and the East Malaysian
states of Sabah and Sarawak each have a High Court. The federal government has authority over
external affairs, defense, internal security, justice (except civil law cases among Malays or other
Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal
citizenship, finance, commerce, industry, communications, transportation, and other matters.
As mentioned earlier in this paper, Malaysia as a multicultural country has many ethnic
groups. The major groups in Malaysia are the Malays, Chinese, and Indians. These ethnics have
their own religions. For example Malays are Muslim, Chinese are normally either Buddhists,
Taoists or Christians and Indians are Hindus and Christian too. Many of thesegroups celebrate
their own religious festivals such as Hari Raya, Christmas, Deepavali, and Chinese New
Year(Abdullah & Pedersen, 2003). In fact, since the late 1990s, the government initiated
celebrating these festivals at the national level and these became part of tourist attractions in
Malaysia (Annual Report, Ministry of Tourism Malaysia, 2002). Furthermore, this phenomenon
was also practiced at the company level where the company celebrated the four major festivals
such as Hari Raya, Chinese New Year, Deepavali and Christmas at the workplace (Abdullah &
Low, 2001). According to Abdullah and Low (2001), religious and cultural celebrations become
one of core elements in creating harmony in the Malaysian workforce.
The following section will examine economic development, flexibility, labour market reform,
and industrial relations policies in Malaysia, especially in the context of globalization. The
Malaysian economic development, labor market flexibility and industrial relations policies are
significant to understand employments conditions among the vulnerable workers, which we will
discuss again in Section 6. The characteristics of the Malaysian economics and globalization will
indirectly impacted on labour market reform, and industrial relations policies especially those in
the informal sector (Lee & Woods, 2005:33-36).
4. Economic development, flexibility, labour market reform and globalization in

Malaysia: an overview
The Asia Pacific region has been the fastest growing area in the world since the 1980s. In the
late 1990s, some of the countries in the Asia Pacific region experienced an economic shock of
unprecedented severity after decades of uninterrupted high growth (Erikson & Kuruvilla, 2000).
The enormity of the shock is evident from the fact that in the worst-affected countries, namely
Thailand, Indonesia, Malaysia and the Republic of Korea, real GDP turned abruptly from over 7
per cent per annum to zero or negative (see Table 1 and Table 2). The greater impact was with its
distributional consequences. In the Malaysian context, foremost among these was the impact on
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unemployment, labour market reform, and industrial relations/human resources policies

(Parasuraman, 1999; Erikson & Kuruvilla, 2000; Hadiz, 2002). Due to inflation, rising
unemployment and fiscal deficit, these nations were forced to restructure their economies.
Therefore, the Malaysian government played a significant role in the recovery of economic
development (Hadiz, 2002) and since 1999 positive recovery has seen in the Malaysian
economic scenario (Navaratnam, 1998).
Table 1. Real GDP Growth (%)

1990 1991 1992 1993 1994 1995 1996
Thailand 11.6 8.1 8.2 8.5 8.9 8.7 6.4

Indonesia 9.0 8.9 7.2 7.3 7.5 8.2 8.0
Korea, Rep.of 9.5 9.1 5.1 5.8 8.6 8.9 7.1
M alaysia 9.6 8.6 7.8 8.3 9.2 9.5 8.6
Philippines 3.0 -0.6 0.3 2.1 4.4 4.8 5.7
Vietnam 4.9 6.0 8.6 8.1 8.8 9.5 9.3
Singapore 9.0 7.3 6.2 10.4 10.4 8.8 7.0
Hong Kong 3.4 5.1 6.3 6.1 5.4 3.9 4.9
China 3.8 9.2 14.2 13.4 12.6 10.5 9.7
Japan 5.1 3.8 1.0 0.3 0.6 1.5 3.9
1997 1998 1999
IM F EIU UBS IM F EIU UBS IM F EIU UBS

Thailand 0.0 0.4 0.0 - -3.0 -3.0 - 2.5 1.0
Indonesia 5.0 4.1 4.7 2.0 2.7 -5.0 - 5.2 0.0
Korea, Rep.of 5.9 6.0 5.6 1.0 -1.2 2.0 4.1 4.6 4.4
M alaysia 7.3 7.0 7.9 2.5 3.4 4.4 - 5.2 5.0
Philippines 5.1 4.9 4.7 3.8 2.4 3.0 - 4.0 3.2
Vietnam 7.5 9.0 7.6 - 6.2 - 6.9 -
Singapore 7.6 7.6 5.2 4.0 2.5 5.7 6.6 4.1 5.0
Hong Kong 5.3 5.3 8.8 3.0 4.5 3.0 4.3 4.4 3.3
China 8.8 9.3 - 7.5 8.0 8.1 - 8.5 8.0
Japan 1.1 0., 9 - 0.3 - 2.1 -
Sources: Adapted from Lee (1998) International M onetary Fund (IM F): World Economic Outlook, M ar.1998; World
Economic Outlook, Interim Assessment, Dec, 1997; The Economic Intelligence Unit (EIU): Country Risk
Service, 1st quarter 1998 and 4th quitter 1997; and Union Bank of Switzerland (UBS); Asian Economics
Weekly, 27 Feb-5 M arch 1998
Table 2. GDP Growth and Percapita GNP (nom.)

Countries GDP Growth Percapita GNP (nom.)
South Korea -6.8% $9,511
Taiwan 3.7% $13,303
Thailand -8.0% $2,450
Indonesia -19.5 $981
Philippines -1.9% $1,203
M alaysia -8.6% $4,287
Source: This data was modified from that of Asia week, 19,February 1999, p.55. These figures are from the national
and multilateral sources from Intl. Telecom Union. Gross Domestic Product (GDP) is the value of all goods
and services produced in one year. Gross National Product (GNP) is GDP plus payments from abroad from
investments and labor, minus similar payments to foreigners.
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Hadiz (2002) and other scholars (Ramasamy, 2000; Kuruvilla & Verma, 2004) argued that the
economic crisis that affected Malaysia and some other countries in Asia was partly due to the
phenomenon of globalization. Before we discuss the details of globalization, flexibility and
labour issues either in the formal or informal sector that effect directly on the individual worker,
let us start with the background of the labour force, and a brief 8i8 of the Malaysian economic
development.
The Malaysian labour force was 10.927 million in 2005 (Economic Planning Unit, Prime
Minister Department, 2006). The majority of the labour force is young with 60 per cent between
sixteen and thirty-four years old. By Asian standards, they are well educated: fifty-nine per cent
have completed 10 years of education and 32 per cent attained the Malaysian Certificate of
Education (MCE) through 12 years of education (Malaysia, Department of Statistics 2004).
Whilst economic development in the advanced industrialized market economies since the
1970s has been associated with a decline in manufacturing, in contrast,Malaysian manufacturing
grew faster than before. There has been an extensive structural conversion of the Malaysian
economy since the early 1970s as a result of the increasing importance of the manufacturing and
service sectors and the decline of traditional sectors such as agriculture and mining (Bhopal &
Todd, 2000). This transformation has directly affected the composition of the Malaysian labour
force. Table 3 indicates that total employment in manufacturing and service industries increased
from 1990 to 2005.
Table 3. Changes in distribution of industry, 1990-2005

(Unit:000 Workers)
Unit 1990 2000 2001 2002 2003 2004 2005
Labour Force
Labour Force ‘000 7,042 9,573 9,892 10,199 10,515 10,856 10,927
Labour Force
Participation Rates:
Total (1) % 64.7 65.7 66.1 66.3 66.9 67.8 66.1
M ale (2) % 85.6 85.7 86.1 86.3 87.1 88.1 85.2
Female (3) % 44.1 44.8 45.0 45.2 45.7 46.4 45.8
Unemployment % of 5.1 3.1 3.6 3.5 3.5 3.4 3.5
labour
force
Employment
Total ‘000 6,686 9,271 9,533 9,840 10,148 10,482 10,540
Agriculture % of total 26.0 15.2 14.8 14.3 13.8 13.4 13.3
M ining % of total 0.6 0.4 0.4 0.4 0.4 0.4 0.4
M anufacturing % of total 19.9 27.6 26.8 27.2 27.9 28.6 29.0
Construction %of total 6.3 8.1 8.1 7.9 7.8 7.7 7.4
Services % of total 47.2 48.7 49.9 50.2 50.1 49.9 49.9
(1) Total number of people economically active as a percentage of total number in the working age populations of 15 to
64 years
(2) Total number of people economically active as a percentage of total number of males in the working age population
(3) Total number of people economically active as a percentage of total number of females in the working age population
Sources: Economic Planning Unit, Prime M inister’s Department, M alaysia and Department of Statistics, 2006.
Page 10
The issue of globalization and labour market reform has attracted many labour economists
either from Malaysia or overseas (Ghosh, 1998; Navaratnam, 1998; Gomez & Jomo, 1999;
Nagaraj, 2004). However, not many studies in Malaysia focus on the impact of globalization on
employment and industrial relations policies, especially on individual workers in the informal
sector (Lee & Woods, 2005). Therefore globalization has not only affected macro level labour
policies such as labour market flexibility, new amendments on labour laws but also it has been
directly and indirectly affected the individual workers either in the formal or informal sectors in
Malaysia. As Lee and Woods (2005:2) recently argued
This means that the globalization debates need to go beyond net employment volume (job
destruction and creation) to address changes in employment conditions. In doing so, employment
conditions should not be reduced to wage levels and inequality but a rather comprehensive view
needs to be taken so as to include other important aspects such as employment status (including
contractual types relating to job security), working time (including leave) and work organizations:
in other words, changes in employment conditions for individual workers.
In the Malaysian context, Rasiah3 (2006) viewed globalization as an external force that has
directly impacted labour market policies. He argued that the process of globalization has changed
the current scenario of labour market in Malaysia especially with the increase of incoming
foreign workers from the neighboring countries such as Indonesia, Thailand, Burma, India and,
more recently, Pakistan. This has had a great impact on local workers, especially on vulnerable
sectors of society, such as young people, women, and workers in the formal and informal sectors
(Narayanan & Lai, 2005).
Rasiah4 and other scholars (Ramasamy, 2000; Verma, 2003; Kuruvilla & Verma, 2004; Lee
& Woods, 2005) argued that with the influence of globalization, the question about labour
standards has also become an issue in the developing countries particularly in Asia Pacific
countries. A few economists (Ghosh, 1998) in Malaysia claim that globalization through the
foreign investors and multinationals has brought many benefits to Malaysia such as creating
employment for Malaysians, creating better working conditions, improving quality life and so on.
However, the other spectrum of present research findings demonstrates that globalization brought
more negative effects to Malaysian workers such as retrenchment, unfair dismissal cases, unfair
treatment by employers, bad health and safety conditions among foreign workers and many other
issues that have direct and indirect impact on individual workers (Ariffin, 1997; Ramasamy,
2000; Hadiz, 2002; Yun, 2002; Narayanan & Lai, 2005). For example Table 4 indicates the
number of retrenchment cases doubled from 2004 (6309) to 2005 (13,677). Among other reasons
for retrenchment are company closure, sale of company, relocation to foreign country, relocated
locally, company reorganization and so forth (see Table 5).
3 Interview with Dr Rajah Rasiah, Professor of Economic Development, Faculty of Economics and
Administration, University of M alaya, 15 November 2006.
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Table 4. Retrenchment Based on Sectors

Sector 2004 2005
Agriculture, Forestry, Fisheries & 60 77
Livestock
M ining & Quarry 44 78
M anufacturing 3730 5763
Electric, gas & Water 21 0
Building Industries 93 106
Restaurant & Commerce 553 367
Transport, Storage & 1 6189
Communication
Financial services, Insurance, 1288 938

Property, Business
Social services & individu 519 159
Total 6309 13,677
Source: Annual Report 2005, M anpower Department , M inistry of Human Resources of M alaysia, pg. 30.
Table 5. Reasons for Retrenchment, January to November 20 2004

Reasons Percentage
Closure 1.6
Sale of Company 5.7
Relocation to foreign country 1.7
Relocated locally 1.1
High production cost/ Reduction in production cost 10.9
Reduction in demand for product 26.1
Shifting from manual to automation 1.1
Recruitment difficulties 0.2
Company reorganization 5.7
Outsource 7.1
Total 100.0
Source: M anpower Department, M inistry of Human Resources.
Furthermore, globalization also allowed companies in Malaysia to be involved in the process

of mergers, reorganization and acquisitions (Hazman & Parasuraman, 2003; Nor, 2003; Ali,
Nordin, Hasan, & Hasan, 2004). Under expanding globalization influences, many private
companies in Malaysia are now either merging with other companies or have closed down their
business and reinvested in foreign countries like China, Vietnam and Thailand (Interview with
Executive Director of Malaysian Federation of Employers-MEF, 18 November 2006). The direct
implication from this issue is that many people are losing their jobs; especially those unskilled
workers who will be gradually replaced by foreign skilled workers. This scenario is already
happening in Malaysia now. This was also emphasized by the MEF as it represents all employers
in Malaysia:
Basically the government is trying to say that we should be putting less reliance on labour
intensive so move upwards towards more like capital intensive and go for skilful workers such
as knowledge workers. But that is desire but what is happening. Say for example you talk
about statistics. There are about half a million young people in the labour force of which
200,000 will go to universities, polytechnic, college and 300 thousand are from lower
Page 12
secondary (PMR) and upper secondary (SPM). These people are joining labour force. The kind
of skill they have is ZERO. When they end up too the lowest level employment. And they are
going to work side by side with foreign workers. This is reality (Interview with the Malaysian
Federation of Employers-MEF, 18 November 2006)
The MEF further argues that
And as a Malaysian citizen I am sad to see that most of rubbish collectors are Malaysians. What
skill can they get by collecting rubbish? Nothing. Our foreign workers are working in the areas
where they can upgrade their skill. Furthermore based on government policies if they want to
remain here after their contract they have an option (Interview with the Malaysian Federation of
Employers-MEF, 18 November 2006).
As discussed previously in this paper, one of the reasons for poorer labour standards, the
declining quality life among workers, less safety and health protection specially those in the
informal sector is actually rooted in the implementation of labour market flexibility under the
influence of globalization phenomena (Interview Malaysian Trade Union Congress-MTUC, 15
December 2006; Interview with Rasiah, University of Malaya, 15 November 2006; Interview
with Ministry of Human Resource, 18 December 2006). In order to face globalization and
economic competition in the international arena, the government will be flexible with
employment acts such as Employment Act 1955 which has several new amendments, and also
reforming the labour market in order to bring more foreign investors to the country (Ramasamy,
2000; Nagaraj, 2004).
The union reacted to this issue particularly on the labour market reform and the globalization
phenomenon in Malaysia. The union perceived that globalization and flexible practices on labour
market reform by the government and employers brought a threat to employees’ job security in
Malaysia. This can be seen from one of the respondents at the Malaysian Trade Union Congress
(MTUC).
We in MTUC see that globalization and flexibility have a big threat to job security. Because
there is lots of demand by the investors coming and put pre conditions that they want flexibility.
So called flexibility which means they should engage any and hire and fire if they want. They
don’t want any proper notice. They expressed the views when government goes out in
delegations to attract foreign investors and the investors of course make lots of demands, too
rigid, we cannot fire people that sort of things. Therefore we find that these are major issues
(Interview with MTUC , 15 December 2006)
On the other hand, the government and employers observe that the flexibility of labour market
reform actually created a huge job market for young people, especially those school leavers and it
also encouraged the active participation of women in the labour market (Nagaraj, 2004). The
government and employers argued that in order to attract more foreign investors coming to
Malaysia, the government has no other options except to make several amendments to the
Employment Act in order to suit the multinational companies criteria specially those companies
which come from USA, Europe, Japan and Korea. This argument was strongly stressed by one of
the respondents at the Ministry of HR
Page 13
Yes, I feel that the amendments on Employment Act and labour market reform are partly
because of globalization and Malaysian companies have to be competing with the newly
industrialized countries such as China, India, Thailand, and Philippines. To be competing and
face the globalization phenomena, we need to flexible our labour laws, rules and regulations. If
our laws are too rigid, then you know employers especially multinationals (MNCs) will prefer
to transfer and invest in Vietnam, China, and Cambodia because of cheap labour. What we
want is to have win-win situation where employers can make profit and the workers have their
job without any retrenchment and redundancy process (Interview with Director, Department of
Labour, Ministry of Human Resources.
The government’s idea is also supported by the representative from the MEF. He said that
Basically you are talking about what I desired of employers. You pass the right word
‘flexibility’. Flexibility in all aspects. Of course flexibility in managing of the people. Currently
it seems to be inflexible so much so people will say that once you employed an employee here
then the employee is untouchable. If you touch the labour, he or she will go for unconstructive
dismissal. If you dismiss him he will say it is wrongful dismissal. And at court you look at the
court awards basically the win cases are employees. (Interview with the Malaysian Federation
of Employers-MEF, 18 November 2006).
So both government and employers have similar arguments that in order to attract foreign
investors then they need to be flexible regarding the labour market and other rules and regulations
including employment acts. On the other hand, the MTUC strongly opposes this policy because
there is no job guarantee for fulltime workers in future as they will be replaced by more foreign
workers or part time or casual works as a new trend in the flexible labour market situation. The
union arguments are also supported by other foreign and local scholars (Bhopal & Todd, 2000;
Idrus, 2001; Todd & Peetz, 2001; Parasuraman, 2004; Parasuraman & Hussin, 2004; Todd,
Lansbury, & Davis, 2004). These researchers argued that in Malaysia, the flexibility of labour
market reform and continuing amendments in labour laws created mass retrenchment, work
intensification, health problems, and so forth. For example, in the past, five people have to do one
job only but now under functional flexibility, an individual worker has to do multiple tasks
(Standing, 1993; Lee & Woods, 2005:35). This will increase work pressure at workplace which
leads to health problems (Parasuraman & Hussin, 2004; Foley & Polanyi, 2006). All these
aspects of employment conditions will be discussed later in this chapter.
In the next section, the discussion will focus on labour policies in Malaysia particularly to
identify several employment laws that are currently implemented. Generally these labour laws
have clearly stipulated and implemented among full time workers in the formal sector in
Malaysia (Ayadurai, Yahaya, & Zainuddin, 2002). The same laws have limited power to protect
vulnerable workers such as women, migrant workers, part time, casual workers and child labour
in the informal sector such as restaurant, agriculture (especially small holders) and construction
industries (Ramasamy, 2000; Nagaraj, 2004; Narayanan & Lai, 2005).
5. Labour Policies
There are a number of laws in the country governing employment and industrial relations
(Anantharaman, 1997; Ayadurai, 1997). The most important of these are the Employment Act
Page 14
1955 and the Industrial Relations Act 1967. Both laws essentially apply only to the private
sector. The Industrial Relations Act 1967 establishes the principles on which industrial relations
in the private sector is founded, namely:-
(a) trade unionism: the principle that employees have the right to organize themselves in
trade unions in order to protect and to promote their economic interests;
(b) union recognition: the principle that unions must (aside from being registered as such by
the state) be recognized by employers as the proper representatives of their employees
before they (the unions) can bargain collectively with employers;
(c) collective bargaining: the principle that unions can negotiate periodically with employers
the terms and conditions of employment of employees, and can, together with employers,
set down in writing in a collective agreement the terms and conditions agreed upon by
them for a specified period; and
(d) dispute resolution: the principle that a variety of ways should be available to employers
and to unions for the peaceful resolution of differences or disputes between them.
The Act also specifies legally acceptable ways of resolving employer-union differences
or disputes (such as negotiation, conciliation, arbitration and industrial action) and it identifies the
techniques and the agencies involved in the use of these ways (like the grievance machinery, the
strike and the lockout, the Department of Industrial Relations and the Industrial Court).
The Employment Act 1955 applies to all types of employees - casual, temporary and part-time
employees, apprentices, trainees and probationary employees, and permanent resident and
migrant/foreign employees, as well as full-time local employees in "permanent" or "regular"
employment, and only to these two classes of employees, although these two together constitute
about 90% of the employed population in the private sector. It governs employment (a) by
regulating the employment relationship; and (b) by legislating the basic terms and
conditions of employment.
The Employment Act makes the terms and conditions of employment legislated by it the
basic and the minimum terms and conditions of employment. Consequently, every employer
(local or foreign) is legally obliged at the very least to make the terms and conditions legislated
by the Act available to each of his employees; and every employee (unionized or otherwise) is
legally entitled at the very least to the terms and conditions legislated by the Act from his
employer. Among the terms and conditions legislated by the Employment Act are the following
ones:- (a) the hours of work; (b) overtime work; (c) a weekly rest day; (d) public holidays; (e)
annual leave, sick leave and maternity leave; and (f) maternity, layoff and termination benefits.
The Employment Act also prescribes the inclusion of any term or condition in the contract of
service, which restricts in any way the exercise by an employee of his basic "trade union" rights,
i.e. the right to form, the right to join, and the right to participate in the activities of a trade union.
The provision for termination benefits is an important provision given the absence of
unemployment insurance. Social security is confined to the provision of insurance in the event of
accidents, and at this point of time covers mostly the lower-wage workers. All employees, as well
as employers, in the private sector (and to a limited extent in the public sector) contribute as well
to the Employees Provident Fund, the funds which can be accessed at age 55. Today, some of
these funds can be used for the purchase of a house, computer and unit trusts.
Page 15
The Employment Act does not legislate a minimum wage nor prescribe wage rates. It does,
however, regulate other aspects of wages. The Act also defines wages and related matters. It is
noted that under the Employment Act, an employee may be time, piece or even task rated. At
present, however they are rated, most employees are paid monthly; and most time-rated
employees are daily or monthly rated. A daily-rated employee is paid only for the days worked in
the month, whereas a monthly-rated one is paid for all the days in the month, that is, days worked
and those not worked (a month being reckoned as a period of 30 consecutive days). But however
an employee is rated or paid, every employee is entitled to all the protection afforded by the Act,
for it does not distinguish between employees by how they are rated or how often they are paid.
Although there is no provision in law for a minimum wage, the Industrial Arbitration
Tribunal in Sri Jaya Transport Co. Ltd. and Transport Workers Union [IAT Award 18 (1966)]
touched on the definition of the terms living wage, minimum wage and fair wage (Ayadurai,
1997). The "living wage" was defined as "the wage required for the normal needs of the average
employee regarded as a human being living in a civilized community, sufficient to provide not
only the absolute essentials of food, shelter and clothing, but also for the education of children,
for protection against ill health, for insurance against old age and misfortune, and for a condition
of frugal comfort. It is not possible to determine what exactly is required as a living wage in
terms of money. The amount must of necessity vary, inter alia, with the marital and family status
of the employee and the economic considerations extant at a given time." The "minimum wage"
was defined to be "the bare and irreducible minimum below which no industry should be allowed
to go." A "fair wage" was stated to be the concept of a wage, which is between the minimum
wage and the living wage. The opinion was also expressed that the actual level of a fair wage at
any given time will depend inter alia, upon the productivity of labour, the prevailing rates of
wages in similar industries in the same region; and the present economic position of the industry
concerned and its prospects in the near future.
In other words, it has been accepted that workers must be paid decent wages for decent work,
so long as the business entity has the capacity to pay, in turn a function of its ability to compete
in domestic and international markets. The current strategy adopted by many business concerns
in addressing this issue is a performance- or productivity-linked wage system. The tripartite
National Labour Advisory Council has proposed that wages consist of a fixed component
comprising a basic wage, an annual increment and contractual bonus (if any) and a variable
component comprising a sum which varies with either the profits of the employer or the
productivity of the employees, or both profits and productivity. However, the establishment of a
productivity-linked wage system requires the elements of trust and transparency from all parties
concerned, and is only slowly gaining acceptance.
6. The trends in employment conditions in the informal sectors in Malaysia
6.1 Trends in employment status, wages, working time, work organization, work intensity,
work-family balance and health and safety
This section is divided into two parts. The first part will report the research findings based on
employment status, wages, working time, work organisation, work intensity, work-family balance
and health and safety. The data collected is based on the interviews conducted with the key
Page 16
industrial relations players in Malaysia such as MTUC, MEF, and Ministry of Human Resources.
Apart from that, several documents such as government official documents, newspapers, and
other secondary sources (journals and books) will be used to support the interviews. This is part
of the triangulation process in order to validate the research findings. The second part will explain
vulnerable groups such as low-paid workers, non-standard workers (e.g., temporary and self-
employed or informal), women workers, young/older workers, and migrant workers, and
investigates their employment conditions compared to other groups. This analysis is expected to
give insightful information on the question of how the benefits and burdens of labour market
changes are distributed among different types of workers in the context of labour market reforms,
or how the labour market reforms have affected different types of workers in terms of
employment conditions.
6.1.1 Employment status

Under the Employment Act 1955, Sabah Labour Ordinance, and Sarawak Labour Ordinance,
fulltime workers are protected especially in the formal sector. However under the globalization
and labour market flexibility as discussed previously, the labour market has now mixed types of
workers in Malaysia such as part time workers, casual workers, self employed, temporary
workers, women workers, young workers and foreign workers. The question that arises from
these types of workers entering in the labour market is ‘how are they protected under the current
employment acts? To what extent has globalization changed the labour market flexibility?
6.1.2. Wages
Wages also are clearly defined in the Employment Act 1955 particularly in the formal sector
(see Section 5 in this paper). However, the wage structure and rate is quite diverse in the informal
sector compared to the formal sector (Interview with MTUC, 15 December 2006; Interview with
MEF, 18 November 2006). According to MTUC, the salary and wages in the informal sector is
not based on market rates but it is up to employers to decide on the daily, weekly, and monthly
salaries. Some of the cases which have been reported in the newspapers are that some employers,
especially in the restaurant industries, do not pay the workers wages for a long time (few months)
(Daily Express, 20 May 2006; Utusan Online 25 October 2006). In fact, in the formal sectors, the
wages are dissimilar within geographical areas in Malaysia. Based on the union research on
wages in the formal sector in Malaysia, the salary among fulltime workers in Johor, South
Peninsular Malaysia, is quite different when compared with the same category of workers in
Kedah, Northern Peninsular Malaysia (interview with MTUC, 15 December 2006). For example,
the wages of electronics workers who are working in Kulim, Northern Peninsular Malaysia are
RM380 (USD 100) per month while the same category workers in Johor earn from RM 1000
(USD 250).
6.1.3 Working time

As we discussed in the Section 5, the working hours are also clearly defined in the Malaysia
labour laws (see Table 6). Table 6 indicates the various issues on employment conditions in Asia
Pacific countries. From Table 6, the weekly standard working hours in Malaysia is 48 hours and
daily 8 hours. Most formal sectors follow these working hours as clearly stated in the law.
Page 17
Table 6. Statutory Regulation of Employment

conditions
Australia Japan Korea China Viet Nam Indonesia Malay sia Philippines Thailand
Working hours
Weekly norm al hours limit NA 40 hours 40 hours 40 hours 48 hours 40 hours 48 hours 48 hours 48 hours
NA 8 hours 8 hours 8 hours 8 hours 8 hours (5- 8 hours 8 hours 8 hours
day
workweek), 7
hours (6-day
workweek)
Daily norm al hours lim it
NA 12 hours 1 hour per 4 hours 3 hours per 104 hours per None 36 hours per
per week day , 3 hours per day day and 14 m onth week
per week and and 200 hours per
36 hours per hours per week
Overtim e lim it m onth y ear
Minim um overtim e premium NA 25% 50% 50% 50% Unidentified 50% 25% 50%
Minim um weekly rest period NA 1 day 1 day 2 day s 1 day 1 day 1 day 1 day 1 day
Holiday s
Minim um annual leave entitlem ent NA 10 day s 15 day s … 12 day s 12 day s 8 day s 5 day s 6 day s
Public holiday s … … 17 day s … 8 day s … 10 day s 12 day s 13 day s
Minim um wages (as of 2004) (Shanghai) (East Java) (no national MW)
$AUS 467.40 605- 708 567,260 635 y uan per 290,000- Rp. 281,750 155-250 M$ per 102-265 P per 133-169 Baht
per week y en per won per m onth 626,000 per m onth month (by day per day
hour month VND per collective
Minim um level in local currency m onth agreements)
303.5 5.22-6.11 476 76.69 18.70- 32.8 40.79-65.79 8.24-4.88 3.20-4.07
Minim um level in US dollar (PPP) 40.36
Notes: "NA" -- "no nationally applicable legislation"
Source: For working tim e, adapted from Annexes I and II in McCann (2005); for minimum wages, TRAVAIL database
Adapted from Lee and Wood (2005), Globalization, Flexibilization, and Changes in Employment Conditions in Asia
and the Pacific: A Review, pg.19.
Table 7. Mean and median hours worked by industry and gender, Malaysia, 2004
Gender T ransport, Financial Real estate, Public Educatio Health Other Private Extra-
storage and intermed renting and administratio n and community households territorial
communication iation business n and social social and with organisation
s activities defense, work personal employed s bodies
compulsory service persons
social activities
security
T otal
Mean 51.2 47.7 47.9 44.5 34.9 46.4 67.8 46.7
Median 48.8 46.1 47.55 45.6 36.3 46.6 62.7 46.4
Male
Mean 52.2 45.0 49.6 45.4 37.7 46.6 50.4 46.4
Median 49.4 46.1 48.2 45.9 40.5 46.8 49.3 46.7
Female
Mean 45.6 45.2 45.2 42.1 33.3 46.3 68.8 48.3
Median 47.0 46.1 46.6 46.6 23.8 46.9 46.7 49.4
Source: Department of Statistics, M alaysia. (2004) Labour Force Survey Report, Kuala Lumpur, p.132.
Page 18
However, from the interview conducted with MTUC, Ministry of HR, and MEF, it shows
that the working time in the small-medium industries and in the informal sector is not based on 8
hours per day as stipulated in the employment acts. Employees in sectors such as restaurants,
construction, self employment, private households and small industries are working more than 8
hours per day without any over time payment (Interview with MTUC, 15 December 2006, see
Table 7). For example Table 7 shows the mean hours of work among the private households with
employed persons is about 67.8 which is more than the normal working hours as stipulated in
employment law. Most of workers in the construction and restaurant industries do not have
employment contracts by law but just a verbal statement from the employers. Workers, especially
from foreign countries, often do not really understand the terms and conditions of work. They
also does not have contributions to the employee provident fund and social security fund as we
can find in the formal sectors (Yun, 2002; Narayanan & Lai, 2005).
6.1.4 Work intensity

According to MTUC, the workers in both formal and informal sectors are facing work
intensity at their workplace (Interview with MTUC, 15 December 2006). From the researcher’s
observation in restaurants, photocopy shops, construction industries and cleaning services in Kota
Kinabalu city, Sabah, Malaysia, most of the workers who are mainly women work intensively
because of pressure from their employers (Indirect observation, from August 2006 to January
2007). Sometimes, their employers scolded the workers in order to demand that their employees
work very hard, especially to entertain customers. From the researcher’s observation, the
restaurant is an obvious case where the place of work was always busy and visited by many
customers. Although the case in Kota Kinabalu, Sabah, cannot be generalized for the whole of
Malaysia, it is a good example to show a real scenario regarding employment conditions in the
informal sector. Another issue is that retrenchment is increasing every year. For example, in 2004,
the total number of workers retrenched was about 6309 and in 2005, the number increased to
13,677. From these statistical data, we can conclude that more workers especially women and
foreign workers will be retrenched in future due to globalization and competition in the
international arena (Hazman & Parasuraman, 2003).
6.1.5 Work-family balance

Recently there has been quite a number of literature which highlight work-family balance
issues (Hochschild, 1997; Noor, 1999; Clark, 2000; Drago, Pirretti, & Scutella, 2007; Maxwell,
Rankine, Bell, & MacVicar, 2007). For example, Noor (1999) in her research on work family
balance indicates that more women are working due to the need to alleviate their financial
burdens and also to support their husbands in financial matters. Furthermore, MEF, MTUC and
the government have also stressed that the issue of work family balance is quite crucial and
serious in Malaysia as more women workers are joining the labour market, particularly in the
services sector. For example in 2000, 35 per cent of those employed are women and 50 per cent
of these are service workers such as domestic helpers, call center assistants, restaurant staff,
waitresses, and so forth (Nagaraj, 2004:7). The present research findings also show that women
are barely able to balance family and work because in many occasions, they have to work at night
time and also early in the morning. The examples of the restaurants sector are good model. Many
restaurants in Malaysia are running their business for 24 hours. Therefore some of restaurant staff,
particularly the waitresses have to work till mid night or till morning (Interview with MTUC, 15
December 2006). In this situation, they have a difficult time balancing family and their work. For
Page 19
example, those women work in restaurants in big cities such as Kuala Lumpur, Johor, Penang and
Kota Kinabalu have to leave their children in their village and work in city in order to earn money
to improve their quality of life. Yun (2002) also has similar arguments where women workers in
the informal sector have to leave their family and work more than 8 hours to earn money to
support their families.
6.1.6. Health and Safety

Health and safety issues are clearly stated in the Safety and Health Act 1994, the
Employees’ Social Security Act, 1969, and the Employees’ Social Security (General) Regulations,
1971 in Malaysia. However, MTUC strongly agreed that these acts are not well implemented in
the informal sector in Malaysia. MTUC’s argument was also supported by Mr. Mohamed Idris,
President, Consumers Association of Penang, where these acts are supposed to provide a
comprehensive social security safety net for workers, but in reality they do not cover government
employees, domestic helpers, the self-employed and foreign workers (Star Online, 11 November
2006). He further argued the construction industry is a sector with a lot of worker accidents and
deaths. Most of the workers in this sector are either from the informal sector or foreign which
immediately excludes them from any social security scheme. While there are regular reports of
worker deaths and injuries at the workplace by the media, little is known about prosecution of the
responsible agencies (The Star Online, 11 November 2006).
Furthermore, there are many accident cases that happens in the informal sector which are
not reported to the Department of Socso (Social Services). The Department of Socso is
responsible for accident claims and other matters relating to health and safety issues at the
workplace in Malaysia. According to MTUC and MEF, many workers in the informal sectors are
not aware of the existence of the Health and Safety Act and Department of Socso (Interviews
with MTUC, 15 December 2006; Interview with MEF, 18 November 2006). For this reason,
employers have an opportunity to escape from their responsibility of paying for medical costs for
vulnerable workers. As a consequence of this, the Department of Occupational Safety and Health
must investigate these senseless deaths and prosecute the guilty parties. Feedback through the
media on action taken against the agencies responsible is imperative as a deterrent to employers.
Another example is that of a waitress named Sri who having gotten used to sleeping in the day
and working at night, by nightfall, she is filled with tension and boredom (Yun 2002). Finally she
decided to visit friends to talk and kill time until six in the morning. As a consequence of this, her
health condition will deteriorate because of less sleep and rest.
Based on the above explanation, the interview data, government reports and newspaper
reports demonstrated the trends in employment status, wages, working time, work organisation,
work intensity, work-family balance and health and safety in the informal sector, especially
among vulnerable groups (women, foreign workers, and young workers). These have recently
attracted public attention. For example, the MTUC perceived that the public observes that the
informal sectors have bad employment conditions such as domestic violence among foreign
maids, retrenchment among women and young workers, unfair treatment by the employers in the
informal sector and many other issues (Interview with MTUC, 15 December 2006). Similarly
Yun (2002) also argued that employment conditions among this vulnerable group has always
received serious attention from the public in Malaysia. Through the content analysis of major
newspapers in Malaysia, every day there is a report about the informal sector and its effect on
employment conditions. The public have also reacted with their comments in the newspapers that
Page 20
the government should take action in order to ensure these sectors have reasonable employment
conditions and their rights are protected under the employment law (Utusan Malaysia, 2 August
2000; Berita Harian, 1 December 2002). This is also supported by Rasiah5 (2006) who argued
that the public is always concern about employment conditions in informal sector which have low
wages, bad health and safety conditions and high work intensity particularly among the women
16/05/2010 g y Globalizations,glabour markety reform
p a…
y g
and foreign workers in Malaysia.
6.2. Employment conditions among vulnerable group if compare to other group
Labour market reform and the influence of globalization have impacted not only on formal
sector’s workers but also those workers categorized as vulnerable, such as women, young/older
people, migrant workers, lowly paid employees, temporary and part time workers. If we observe
the situation in formal sectors such as manufacturing, from 1997 till now, many local and foreign
workers particularly women were retrenched due to the Asian economic crisis. In this section, the
researcher will select two case studies on how employment conditions differ between a
vulnerable group with another group. These cases examine retrenchment and domestic foreign
servants especially those are coming from Indonesia and Philippines.
6.2.1 A case study on retrenchment in Malaysia

For Asia, the financial crisis of 1997 created intense economic turmoil and left a trail of ruin,
which has thrown years of economic growth and stability into disarray (Hazman & Parasuraman,
2003). The government has taken measures with varying degrees of success to mitigate and even
reverse the effects of the financial meltdown. Despite the tough measures taken to check the
dramatic decline in financial markets, the economy has not fully recovered from the free fall.
Although the focus during the recent crisis has been on large businesses and the financial
intermediaries - the two primary culprits alleged to have exacerbated the decline; the major
casualty were the workers of the old economy who were quickly retrenched to keep ill-managed
companies afloat. The bursting of the Dotcom bubble also added to the long list of retrenchment.
The retrenchment that started as a trickle as a result of the relocation of multinational

businesses to other regions, especially China, became a flow after the abrupt economic slowdown
precipitated by the financial crisis.
5 Interview with Professor Rajah Rasiah, Professor of Economic Development Studies, University of M alaya, 15
November 2006.
Page 21
Chart 1: Retrenchment (1997-2001)
100000
90000
80000
70000
60000
50000 VSS
40000 Retrenchment
30000
20000
10000
0
1997 1998 1999 2000 2001
Source: NST 27/2/99, 29/11/2001, 1/11/2001 and M inistry of Human Resource. Note: VSS was estimated at 10%
of the reported retrenchment except for 2001, which is based on reported data (NST 1/11/2001)
1997. The numbers must be worrying as the Ministry of Human Resource’s website no
longer provides 5 year retrenchment data. This image management exercises does little to
minimize the trauma of retrenchment, if indeed that was the motive. With more aggressive use of
Information Communication Technology (ICT), the traditionally large employers are expected to
further downsize to remain lean and competitive. The economic gyrations and relocations are
bound to keep the pressure on retrenchment. Not all downsizing is achieved through retrenchment.
Some large companies have given the workers Voluntary Separation Schemes (VSS) as part of
termination benefits that included in the Employment Act 1955.
In fact, it is prudent to reduce surplus labour through VSS prior to retrenchments. VSS,
which allow employees to self-select for early retirement, are officially not regarded as
retrenchments though they should be. For example, in 2001 about 289 employers executed VSS
involving 25,000 employees (NST,11/1/2001). In the banking sector, for instance, much of the
staff reduction was achieved through VSS and hence, official retrenchment data for the sector
was under-reported. The staff shedding in the immediate future is expected to take place via VSS
rather than the usual retrenchment. The inclusion of VSS to retrenchment data will definitely
push the retrenchment numbers up dramatically (chart 1 in this paper includes estimated VSS).
Based on the MTUC experience of dealing with retrenchment and VSS cases, there are many
small and medium size companies and employers in the informal sector who have retrenched
workers but not paid any termination benefits as practiced by the big companies. In the next
section, some cases of retrenchment that have had a big impact on individual workers’ lives are
highlighted.
Page 22
Yun (2002) has conducted an in depth study on globalization and its impact on the Malaysian
workforce. Yun argued that due to the globalization phenomenon, mergers, downsizing and firm
closures have brought a drastic decline in the lives of the affected workers. Apart from
retrenchment, wage reduction was also practiced with some firms cutting as much as 50% of
employees’ wages to avert layoffs besides defaulting from paying their share to the Employee
Provident Fund (EPF).
Here, the researcher highlights some of cases that were extracted from the Yun (2002)
research among the workers who were retrenched during the Asian economic crisis. Yun
conducted in depth interviews with 20 workers including both females and males, ranging from
17 to 63 years old. The majority of workers interviewed did not receive any compensation
benefits due to retrenchment. For these workers, retrenchment had come as a sudden and terrible
shock. In other words, the retrenched workers were suddenly in a crisis situation where they did
not have the capacity to pay for their house loans, bicycle loans and some workers were even
unable to pay for their house rental.
For example, one of the interesting case studies that Yun (2002) reported on was about the
life of Minah after her employer retrenched her. For Minah, an operator from a textile factory in
Pahang, West Malaysia, the problem of physical survival was aggravated by the fact that her
husband, who was working in the same factory that employed between 350-400 workers, was
also retrenched. While Minah could get another job, her husband remained unemployed. As
payment of rent for their house could not be delayed for more than three months, the family had
to shift to stay with Minah’s parents who also advanced them a loan to tide them over. Apart from
this, their daughter had to be cared for by her grandmother, as they could no longer send her to
the babysitter. With a single earner’s low income, the couple had to give up their appliances
(washing machine, TV, fridge) which they had acquired on credit, as they could not continue with
the remaining payments.
In another case, Noraisha was a 22 year old who was a rural migrant who moved from
Kelantan to Kuala Lumpur city. The supermarket retrenched her and as a consequence of being
without any salary she borrowed money from her friends. Her monthly expenses on meals cost
her about RM 300 (about USD 75). It also meant that she could no longer call home once in two
days to chat with her family as she used to do. When Jamilah, a50 year old operator in a jeans
factory, was retrenched, she stopped paying the fees of her two children who were then attending
a local university. Fortunately, she was allowed to owe the fees for a few months. But in the case
of 22 year old Jamil, a driver with a chicken factory, his retrenchment in 1998 led him to retract
his promised engagement thus causing a great deal of embarrassment in his relations with his girl
friend and her family. Aman, aged 45, was a quality control worker at a cake factory, and was
retrenched for the weak excuse that the workers had low education. Mahtun (40 year old) and Joo
felt cheated by their employers because the factory had given them short notice without any
compensation after retrenchment and they had also worked more than 8 years. They felt bitter and
angry (menyampah dan benci) with their employers but they did not have any recourse over their
employers’ decisions on retrenchment because retrenchment is part of managerial prerogatives
that are stipulated in the Industrial Relations Act 1967 (Section 13).
The union also highlighted the VSS issue with one interesting case which happened in Sabah,
East Malaysia (Interview with MTUC, 15 December 2006). The union stated that over the last
Page 23
five to six years, the word VSS is becoming popular. When the workers signed up for VSS, he or
she cannot complain about unfair dismissal because he had signed for it. Whether he or she
signed on a voluntary basis or not, the employer will give money. At the same rime, the employer
threatened the workers that if they did not want to sign, they would be terminated without
receiving any financial benefits as part of the VSS exercise.
For example there is one case of how VSS affected the individual workers in Hong Kong
Shanghai Bank (HSBS), Sabah, East Malaysia. HSBC carried out an exercise on VSS but many
workers did not want to sign it because in Sabah jobs were scarce. They are begging to keep their
jobs because they have worked there for 10-15 years. In response, HSBC said if the employee
does not sign up for VSS, the company would transfer her to KL. She lives in Kota Kinabalu,
Sabah, is married and has children, and she had bought a house. However, to keep earning an
income, she had to go to Kuala Lumpur and work and live alone. The husband and children
remained in Kota Kinabalu, Sabah. These circumstances are becoming very common in Malaysia.
It has serious effects on individual workers’ lives. The union’s stand is that all these issues need
to be address in order to make workers in Malaysia become less secure and vulnerable.
Most of these workers, such as the individual workers cases as mentioned above, mentioned
that they went through a painful life experience during the retrenchment period. They are people
who feel powerless as nothing can be done except for feelings of anger because of their own
helplessness (Yun, 2002). In the workers’ opinion, the company really has no sense of
consideration (bertimbangrasa) for their employees at all. In actual fact, the employees do not
have power to over rule their employers’ decisions on retrenchment because retrenchment is part
of the managerial prerogatives that are stipulated in the Industrial Relations Act 1967 (Section
13).
Based on the selected cases that were discussed above and looking at the future trend,
retrenchment issues will continue to happen in Malaysia. This is a critical matter that was
emphasized by MTUC and MEF, and they are expecting the government to play a vital role on
this matter. From the employers’ perspective, in the near future many young workers and women
will be losing their jobs especially in the small and medium size industries (SMI) when
companies close down their factories and start to import the cheapest products from China,
Thailand or Vietnam (Interview with MEF, 18 November 2006). For instance, the respondent
from MEF argues:
What is the point you produce in Malaysia when you can import at a cheaper price and sell at a
more competitive price… So the end result is that they insist manufacturing to become a
trading company. You can see that the Lever Brothers company has office now in Menara
Telekom and they are not producing anything. They only are doing paper work and start to
import products from Thailand and Vietnam and sell back here. So the margin of profit is there
as a trading company. This is reflecting further the stages of our economy. This is a serious
matter in Malaysia that the government should be concerned about this matter (Interview with
MEF, 18 November 2006)
The MTUC also has the similar views with MEF about retrenchment and workers’ layoff
cases in Malaysia. MTUC worries about future trends in the global economy and the impact on
workers’ employment conditions.
Page 24
It is very much directly related to globalization. China has become a big factor. They produce
and bring the products here and sell it like 50 or 60 % cheaper than price in Malaysia. We have
companies producing TVs and washing machines which are now closing down. They said they
can’t compete over here. They go to China and produce over there. So you lose. Like
companies in Bangi, Selangor, West Malaysia which existed for 40 years and now they said
they are closed ready. They now close and they are going there and produce over there. In this
context the workers here will be losing jobs. TV you know you buy here say RM1900 (USD
480) for 24 inch and China products come over here and sold for RM550-RM600 (USD 200)
only (Interview with MTUC, 15 December 2006).
The above statement clearly indicates that in future, many workers in Malaysia will be
retrenched due the impact of the global economy and international competition particularly in the
Asia Pacific region (Verma, 2003; Lee & Woods, 2005). This is also confirmed in Table 4 where
the number of retrenchment cases is increasing at a rapid rate from year to year.
6.2.2. Foreign workers

As discussed in Section 4, due to the influence of globalization and the labour shortage, some
of the critical sectors such as construction and plantation are highly dependent on foreign workers
as local workers are not interested to work in these industries, particularly after the Asian
economic crisis in 1997 (Narayanan & Lai, 2005). As Battistella (2002:18) argued ‘migrants are
a by-product of globalisation, which disrupts national labour markets and re-directs workers to
internationalised labour markets’. Table 8 indicates that the total numbers of foreign workers
increased from 1990 to 2005. The highest numbers of foreign workers were in the manufacturing,
plantation, and services (domestic helpers) sectors. Table 9 demonstrates that Indonesian workers
are the highest number of foreign workers in Malaysia. They comprise 668,345 (about 63%)
followed by workers from Nepal (143,237), Vietnam (63,461), Myanmar (58,758), India (48,244)
and Bangladesh (37,599). According to MEF and MTUC, there are about 1 million illegal
foreign workers who are working throughout the country and are not registered under the
Ministry of Human Resources, Malaysia (Interview with MEF, 18 November 2006; Interview
with MTUC, 15 December 2006).
Page 25
Table 8. Distribution of Contract Migrant Workers by Sector, 2000 –2005 (in thousands)
1990 1995 2001 2003 2004 2005

(as at end (as at end
July Dec)
Agriculture 47.9 36.1 32.9 16.5 24.7 22.0*
M ining 0.6 0.4 0.2 - - -

Construction 10.4 13.5 11.5 23.6 19.8 14.5
M anufacturing 9.8 24.1 24.7 31.5 30.5 29.9
Services 31.3 25.9 30.7 28.4 25.0 33.6#
Total 100.0 100.0 100.0 100.0 100.0 100.0

('000) (242.0) (479.3) (863.8) 1,126.8 (1,359.5) (1,944,646)
Notes: * 19.8 per cent are employed in plantations.

# 17.1 per cent are employed as domestic helpers.
Source: Department of Immigration as cited in M inistry of Finance, Economic Report, 2004/2005, Kuala Lumpur;
Department of Immigration, unpublished figures for 2005.
Table 9. The number of foreign workers in Malaysia based on citizenship

No. Citizen Number of Foreign Workers
1 Indonesian 668.345 (63%)
2 Nepalese 143,237 (13.6)
3 Vietnamese 63,461 (6%)
4 M yanmar 58,758 (5%)
5 Indian 48,244 (4%)
6 Bangladesh 37,599 (3%)
Source : Annual Report 2005, M anpower Department , M inistry of Human Resources, M alaysia, p.1
The fundamental question is what the employment conditions are among foreign workers,
specially from the individual workers’ perspective. Many studies on foreign workers in the past
only focused on the reasons why they were coming to work in Malaysia (Ramasamy, 2004;
Kanapathy, 2006), or they only concentrated on certain industries such as construction
(Narayanan & Lai, 2005). Most of these studies were based on the quantitative approach without
really understanding the individual workers’ problem. In this section, the researcher will discuss
some of issues pertaining to the domestic helper as we can see from the Table 8 they are also
highest number in the Malaysian labour market. Since 2002, the media has been frequently
reporting the problems faced by domestic helpers in Malaysia. Based on the Annual Report 2005
of Department of Manpower Department, Ministry of Human Resource, from 2002 to December
2005, Manpower Department received 451 complaints about their salary. About 0.15% is coming
from Indonesian workers where there are now about 306,724 working as domestic helpers
(Annual Report 2005, Manpower Department, Ministry of Human Resources, Malaysia, p.100).
The complaints of individual domestic helpers and employers to the Manpower Department,
Ministry of Human Resource can be seen in the Table 9.
Page 26
Table 9. Complaints of domestic helpers and employers to Manpower Department, Ministry of Human
Resource, Malaysia (2002-2005)
Complaints Domestic Helpers to employers Employers to domestic helpers
Does not pay the salary with reason the employer will keep False statement on age and health
the money in bank of behalf of servant and will pay the condition level
whole salary after their contract will be terminated.
Does not give proper food until affected the health Runaway from the house and follow
condition of domestic helpers. other friends to find another job
Does not pay the salary with reason the employer will keep Torturing employers’ children
the money in bank of behalf of servant and will pay the
whole salary after their contract will be terminated.
Does not give proper food until affected the health Steal employer’s money and other
condition of domestic helpers valuable things
Does not provide a proper accommodation Do not have skill to handle electrical
appliances due lack of training and
not skillful
The duration of working hours very long and rest time is Involved in fornication and adultery
not enough as result of this affect their health conditions matters
and concentration of the work
The servant also is working for employer’s relative without Employment agencies falsely the
any payment. documents of domestic helpers
health condition. As a result of this,
the employer terminated domestic
helpers
The domestic helpers do all kind of jobs such as working in Established prostitution syndicate
restaurant, night market and so forth without really among domestic helpers in
concentrating on household work. employer’s house
Deduction on monthly servant salary for the payment of job Employers are in the mid confusion
agency, renew work permit, pay medical cost and so forth because they do not pay servant pay
for 6 months because they have to
settle payment to the employment
agency in Indonesia. By right the
employers have to pay servant’s
salary after 7 days working. This
stipulates under the Employment Act
1955.
M uslim servant ask by non-M uslin employer to do not halal
work such prepare food with has pork meat and also bath
dogs
The employer is not allowed the M uslim servant for prayer
sessions.
M ental, physical and sexual torturing by employers

Source: The Annual Report 2005, M anpower Department , M inistry of Human Resources, M alaysia, p.100
Based on the Table 9, we see that employment conditions such as wages, working time,
health and safety among domestic helpers as one of the vulnerable group are not the same as
other workers in the formal sectors. According to Mr Rajasegaran, the MTUC secretary general,
the level of wages and health and safety for the domestic helpers is not based on market forces
and the Employment Act 1955. Mr Rajasegaran further argues that basically the problem arises
among the vulnerable groups because there is no minimum wage act in Malaysia which would
protect them from all kind of victimizations.
Page 27
The key question is how much weight will policy makers such as the government and
employers give to the above matters? Is there any proposed policy in future to protect these
workers from the victimization of employers as part of their unfair labour treatment to workers?
These aspects will be discussed in the next section, particularly to examine if there are any labour
policy directions among the vulnerable group and non-standard workers in Malaysia.
7. Policy directions on employment conditions among vulnerable group in the informal

sector
Based on the discussion in Section 6, there are implications for policy makers such as the
Ministry of Human Resource, MEF and MTUC jointly to discuss relevant policies to protect
workers’ rights in the informal sector. The researcher will discuss some of the issues pertaining to
the labour policy directions on this vulnerable group in Malaysia. Four main issues that will be
highlighted in this section are retrenchment, part time workers, minimum wage and foreign
workers. From the interview conducted with MTUC, MEF and the Ministry of Human Resource
there are no specific labour policies for the vulnerable group in the informal sector. But there are
more and more discussions between these parties to look into labour policies in the informal
sector. Some of the issues will be highlighted below.
7.1. Policy on retrenchment
Recognizing this, Section 13 of the Industrial Relations Act (1967) stipulates retrenchment
as part of a set of management prerogatives. Retrenchment is a common outcome of business
restructuring, closure or liquidation and sometimes, industrial conflict. The freedom to employ
and to terminate such employment for reasons of business only is a recognized right of the
employers (Maser Sdn Bhd. V Yeoh Onn Wah Award No 24/1990). But because this right can be
easily abused, the government and the courts have developed a set of standards and safeguards to
avoid abuse. These regulations are intended to minimize abuse of this right rather than minimize
the exercise of this right. Even though the economic rationale for the right of employers to hire
and fire is appreciated, that does not mitigate the ill effects of its frequent use. There is, however,
a huge cost that is borne by society, especially the employees, because there is no unemployment
insurance or unemployment assistance in Malaysia (Interview with MTRUC, 15 December 2006).
Since 1997, many businesses have folded or are facing this possibility. Some foreign owned
businesses have hastily fled the country, leaving their employees with no means of recovering
their unpaid wages.
Therefore till present, there is no clear policy direction on retrenchment in Malaysia. MTUC
proposed setting up a National Retrenchment Fund in 1998 to the government. It is reported that
the MTUC proposal for a 50 cents contribution per employee by the employer has the support of
the government as well (NST, 26/2/2002). On many occasions, this issue has been continuously
highlighted at the National Labour Advisory Council meetings but there is no positive move from
the government and employers. Until January 5, 2007, Human Resources Minister Datuk Seri Dr
Fong Chan Onn said that the MEF and MTUC had agreed in principle to set up a retrenchment
fund jointly contributed by employees and employers (News Straits Times, 5 January 2006). This
is similar to that currently operated by Socso and the Employees' Provident Fund. However there
is strong opposition from other employers associations such as the Federation of Malaysian
Page 28
Manufacturing (FMM) about this policy (Business Times, 17 January 2007). The rationale for
FMM’s resistance was because the operation costs will increase for companies particularly when
the business climate and the world economy is always already so uncertain and unpredictable.
Although it has been eight years, the union is still continuously pressuring the government
to take serious consideration of this matter. In fact the existing Employment (Termination and
Lay-off Benefits) Regulations 1980 failed to protect workers who were rendered jobless in the
recent economic crisis. On this merit, the union is trying to push the government and employers
to reconsider the union’s proposal for the National Retrenchment Fund to be implemented as
soon as possible. Based on Table 4, the number of cases of retrenchment every year is increasing
tremendously which needs serious attention by the government and employers. In fact there are
different labour laws between Peninsular Malaysia, Sarawak and Sabah. The Sarawak and Sabah
Labour Ordinances show that workers are not protected when there is retrenchment. There are no
termination benefits that are covered in these ordinances as compared to the Employment Act
1955 which has a clause on the Termination Benefits and this is only practiced in Peninsular
Malaysia (Hazman & Parasuraman, 2003).
A ILO report concludes “…the [Asian] financial crisis has made it clear that unemployment
insurance schemes could play a substantial role in coping with unacceptable level of hardship
caused by rapidly escalating unemployment” (ILO, 2000). A Socso like fund and agency can
alleviate the hardships of thousands of employees. The fear of the employers and government that
such a fund will burden the employer and government is unfounded. Suitable incentive systems
of can be built into the claims to discourage dependence on this aid. Some guidance for this can
be obtained from the English Redundancy Act 1965 (Romesh, 2002). The argument that the
establishment of such funds and the required contributions can hurt the competitiveness of our
economy is an unsustainable one. Welfare and social responsibility are not opposing concepts to
competition. They should indeed be viewed as an integral part of it. As we prepare ourselves for
the new millennium, the new workers, and the new type of competition, it is imperative that
employers become more sensitive to the needs and well being of society as a whole and revise
their customary opposition to any perceived cost increase. The Europeans and especially the
Scandinavians have attained a strong economic position while having a high level of care for the
workers. Productivity and not merely cost reduction should be the strategy for building future
competitiveness. South Korea began such insurance in 1995 and has rapidly expanded the scheme
during the recent crisis. An ILO study of introducing a similar scheme in Thailand estimated that
a payroll tax of 2.5% declining to .06% in the seventh year could sustain a payout for 5 months at
50% of the earnings (ILO, 2000).
7.2. Policy on part time workers
As we discussed in Section 4 of this paper, globalization and labour market flexibility has
actually created many types of work arrangements such as part-time workers, temporary workers,
casual workers, self employed, and so forth (Charlesworth & Whittenbury, 2007). This aspect
became more serious after the Asian economic crisis hit many of the Asian countries. Therefore,
since 1997, there are various discussions between MTUC and the Ministry of Human Resources
in order to protect part-time workers and casual workers. Under the existing Employment Act
1955, these types of workers are not really protected although, in general, the law is applied to all
kind of workers. Currently the government is seriously considering including part time workers
Page 29
under the Employment Act which will mean that part time workers will also get the same
privilege as fulltime workers (Interview with Senior Industrial Relations Officer, Ministry of
Human Resource Malaysia, 18 December 2006). The issue on part time workers received huge
publicity from the media during the Asian economic crisis when the majority of retrenchment
cases happened among part time workers (Hazman & Parasuraman, 2003).
7.3 Policy on minimum wages
Under the existing employment laws in Malaysia, there is no clause on minimum wage
(Anantharaman, 1997; Parasuraman, 2004). The state had always rejected the demand by the
trade union to enact minimum wage legislation (Bakar, 2003; Todd et al., 2004). Since the 1980s,
the national union raised this problem when the workers in the plantation sectors received their
salary on daily basis. The National Union of Plantation Workers (NUPW) was fighting for the
plantation sector workers to get their monthly salary with a reasonable minimum wage with the
Malaysian Association of Plantation Producers (MAPA) (Ramasamy, 1994; Selvakumaran, 1994).
After the intervention from the government, on 22 April 2003, MAPA and NUPW signed a new
collective agreement which changed the mode of receiving a daily salary to monthly salary but it
has no fixed salary (minimum wage) clause in the agreements (Utusan Online 11 May 2003). In
that case, the employers will pay a monthly salary without any minimum standard and they will
give reasons that the salary in any sector is based on market forces. On the hand, MTUC
represents the whole private sector employees and continually campaigns and pressures the
government and employers to enact a minimum wage act for non-managerial employees and also
those who are working in the informal sector. However, the MTUC proposal on minimum wage
was opposed by many employers including MEF and FMM.
It is quite interesting to mention here that under the current Prime Minister, plantation and
agriculture are becoming important sectors for the development of Malaysian economy. In the
2006 Annual National Budget, the plantation and agriculture sectors received a huge allocation
compared to other sectors. In late 2006, the plantation sector which were owned by government
linked companies (GLCs) were merging with three other companies to form one large company
and consequently became a dominant sector in Malaysia. For example, Synergy Drive Bhd took
over plantations-based Sime Darby Bhd, Kumpulan Guthrie Bhd and Golden Hope Plantations
Bhd in a landmark merger deal valued at RM31 billion. The "big three" are among Malaysia's
biggest plantation companies and Synergy Drive will eventually become the world's largest listed
oil palm plantation player if everything is in place. However it is unfortunate that the act on
introducing a minimum wage in the plantation sector is still not implemented by the government
and discussions seem that they will still continue without any future direction or commitment on
this matter. Employers and the government always oppose the idea of a minimum wage act in
Malaysia. Although other countries like UK already has a provision on the minimum wage and
also established the Low Paid Commission Malaysia has firmly refused to do so even though it is
one of the fastest developing countries in the region and aims to achieve developed nation status
in year 2020. MTUC as a national union is really concerned over this matter. In a recently
interview with Mr Raja Segaran, Secretary General of MTUC, he argues that it is clear that there
is no policy for non-standard workers or vulnerable workers in Malaysia, especially as the
government has not enacted any policy for a minimum wage. He said further ‘we don’t see any
future development on minimum wage…. We don’t have any indication that they are going to do
this policy’.
Page 30
7.4. Policy on foreign workers
As we highlighted in Section 6, the problem foreign workers face and their protection under
the law make them quite vulnerable, although the government claims that all labour laws apply to
all kinds of workers including foreign workers in Malaysia (Interview with Director of Industrial
Relations, Ministry of Human Resource, 18 December 2006). As one of senior respondent from
the ministry said
Wages and benefits between foreign and local workers are not different. Because under
Malaysian labour law, there is no difference whether you are a local or foreign worker. As long
as they are workers, they are all protected under the law. They (foreign workers) can join the
union and they are allowed to join unions (Interview with Director of Industrial Relations,
Ministry of Human Resource, 18 December 2006).
The government idea is also supported by employers. One of the MEF’s senior officers
reveals
‘I would say foreign workers are protected even under our law there is no difference between
foreign and local workers. Under Employment Act 1955, they are equally protected. The only
thing is that of course there is provisions to say that they can be retrenched first if there is down
turn in the business’ (Interview with MEF, 18 November 2006)
However, other studies (Abdul-Aziz, 2001; Battistella, 2002; Narayanan & Lai, 2005)
demonstrated that foreign workers in Malaysia were not really protected under the Malaysia law
especially in term of wages, working time and health and safety because of a lack of policy
implementation. There are many cases that have been reported, such as foreign workers who are
retrenched without any compensation, injured workers who are without any social insurance, and
those whose working time is far longer than it has been stipulated in Employment Act (Abdul-
Aziz, 2001; Ramasamy, 2004). For example w age setting in the Malaysian construction industry is
determined by market forces, free from institutional imposition and trade union involvement. Being
a signatory to the ILO Migration for Employment Convention (Revised) 1949 (No. 97) and (No.
143), Malaysia is obligated to ensure that employers give equal treatment to foreign workers (Lee &
Sivananthiran, 1996). While dissatisfied regularized foreign workers (clandestine workers are
deprived of protection) are entitled to complain to the Labour Department, such action is rare for
fear of reprisal (Abdul-Aziz, 2001:793). The normal practice is to seek alternative employment
(although the consequence for regularized workers is that they become illegal in the eyes of the
law). As a safety measure, there are various safety legislations which main contractors are
supposed to implement at their construction sites, the latest being the Occupational Safety and
Health Act 1994. For example in the construction industry, safety performance leaves much to be
desired (Abdul-Aziz, 2001). Abdul further argued that official statistics do not reveal the true
situation, as on-site observations found under-reporting of accidents to be frequent. While stricter
enforcement and publicity campaigns have inculcated greater safety awareness in the construction
industry, officers of the Department of Occupational Safety and Health (DOSH) complained that
main contractors were slow in upgrading safety standards. With clients pressing for their projects to
be completed rapidly, safety was usually compromised.
Page 31
Although there are many labour law legislations and foreign workers policies in Malaysia, the
implementation process is still lacking due to employers’ attitude to implement these policies
(Narayanan & Lai, 2005). However, currently the government is seriously considering monitoring
the enforcement of laws and policies among the foreign workers. For example, one of the
measures from the government is that all foreign workers should be covered by the individual
insurance in order to protect them if there is any accidents occur at workplace. For domestic
helpers, recently the government came out with a salary scale based on the person’s country of
origin. For example, Filipino domestic helpers will receive a high salary because they can speak
English and also they are relatively educated compared to other citizens. The argument is that
some Filipino domestic helpers receives a monthly salary of about USD300 per month in Japan,
Hong Kong, Taiwan, and Korea compared to Malaysia (Interview with MTUC, 15 December
2006; Interview with Director Manpower Department, 18 December 2006). Second, the employers
should open a bank account and deposit their salary every month, so that the domestic helpers can
see their pay deposited into their bank account (Kanapathy, 2006). Employers have to provide
details on job descriptions for domestic helpers. This will allow them to concentrate on their job
based on job descriptions. According to the Director of Manpower Department, the government
will take a serious action if any employers practice unfair labour treatment towards any foreign
workers, such as if the employer was unwilling to follow the Health and Safety Act 1994 and
Employment Act 1955. Even though the government claims that they will take serious action, the
practical evidence as reported in the present research shows that there are many cases where
foreign workers were exploited by the employers. This problem become even more serious when
they are working under the title of “Illegal Immigrant” throughout the country (Ramasamy, 2004).
Based on the research findings as discussed above, it seems that there is an urgent need for
the government, union and employers to play a vital role to discuss various labour policies to
protect workers (vulnerable group) especially those in the informal sector if we want to see
Malaysia truly become a developed nation by the year 2020.
8. Conclusions: summary and prospects
The aim of this section is to highlight theoretical and practical contributions based on the
research findings and discussions in Section 6 and 7. From a theoretical point of view, the main
summaries of the above research findings indicate that globalization, labour market flexibility and
reform have indirectly impacted working conditions among vulnerable group particularly in the
informal sector in Malaysia. These research findings also supported other studies as globalization
and labour market reform on employment conditions impacted this vulnerable group particularly
those in the informal sector (Lee & Woods, 2005; Henley et al., 2006). As Henley et al. (2006:3)
argued, “the growth and scale of informal employment in many developing countries has been
traditionally attributed to the displacement of workers into insecure forms of labour market
attachment as the only feasible alternative to unemployment”. Similarly the researcher and also
other scholars such as Rasiah6 (2006), Yun (2002), Nagaraj (2002), and Ramasamy (2000) argued
that although Malaysia is one of the fastest developing country in Asia, the workers’ welfare and
their employment conditions particularly among the vulnerable group and non-standard workers
in informal sectors are not well protected under the current employment acts. As Ramasamy
6 Interview with Prof Dr Rajah Rasiah, 15 November, 2006, University of M alaya, Kuala Lumpur.
Page 32
(2000:13) argued ‘the state identified the interest of global capital with interest of the nation,
labour legislation was tightened, and policies were introduced to ensure that labour would not
step beyond certain permissible boundaries’.
The second contribution is related to the implications of study. First, the future of
employment conditions among the vulnerable group in informal sector is depending three social
partners (employers, union and the government). The National Labour Advisory Council (NLAC)
should play a vital role and be in the position to make firm decisions on labour policies
particularly workers in the informal sector. From the interviews conducted with MTUC and MEF,
NLAC is just an advisory body without has a real power to propose a law on employment
conditions among the informal sector workers. In the past, there were many discussions among
these social partners but there has been no action plan and no strategic decisions have been taken
into consideration - especially to protect part time, casual, temporary, self employed and so on.
Second, trade unions should be reminded not to remain only as a special interest organization.
It must involve itself in political activity at both the state and national level as a social movement
seeking to build a society based on justice and equality. To inspire a following, trade unions must
adopt a progressive stance with a set of new political ideas to go with its class-based activities
(Yun, 2002; Todd et al., 2004).
Third, the government should make an attempt to develop the informal sectors’ workers with
the necessary skills, enhancing the scope for the adoption of innovative work arrangement and
improved worker protection. Fourth, a consistent policy towards foreign workers within the
context of their anticipated contribution to growth is necessary to ensure that the rights of all
workers are protected. Finally if Malaysia is truly to become a developed nation in 2020, the
existing employment acts and labour policies should be revised in order to give a maximum
protection without any discrimination over informal or formal workers.
In sum, based on the limitation in quantitative data on employment conditions among

vulnerable workers in the informal sector in Malaysia, the present research indicates that future
research should be conducted through a large-scale survey in Malaysia by employing a
quantitative approach in order to understand the nature and the overall characterization of
employment conditions among vulnerable workers in the informal sector.
Page 33
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Globalizations, labour market reform and changes in employment conditions:

1. Introduction and background of research

General objectives of this paper:

1. To describe the development of industrial relations and human resource policies in

Figure 1. The location of study: M ALAYSIA

3. An overview of history, politics, cultural and social phenomenon in Malaysia

Malaysia is a constitutional country with a democratic political structure, technically headed

4. Economic development, flexibility, labour market reform and globalization in

unemployment, labour market reform, and industrial relations/human resources policies

Table 1. Real GDP Growth (%)

Thailand 11.6 8.1 8.2 8.5 8.9 8.7 6.4

IM F EIU UBS IM F EIU UBS IM F EIU UBS

Table 2. GDP Growth and Percapita GNP (nom.)

Table 3. Changes in distribution of industry, 1990-2005

Total (1) % 64.7 65.7 66.1 66.3 66.9 67.8 66.1

Table 4. Retrenchment Based on Sectors

Financial services, Insurance, 1288 938

Table 5. Reasons for Retrenchment, January to November 20 2004

Source: M anpower Department, M inistry of Human Resources.

Furthermore, globalization also allowed companies in Malaysia to be involved in the process

The MEF further argues that

6. The trends in employment conditions in the informal sectors in Malaysia

6.1.1 Employment status

6.1.3 Working time

Table 6. Statutory Regulation of Employment

Mean 51.2 47.7 47.9 44.5 34.9 46.4 67.8 46.7

Median 48.8 46.1 47.55 45.6 36.3 46.6 62.7 46.4

Mean 52.2 45.0 49.6 45.4 37.7 46.6 50.4 46.4

Median 49.4 46.1 48.2 45.9 40.5 46.8 49.3 46.7

Mean 45.6 45.2 45.2 42.1 33.3 46.3 68.8 48.3

Median 47.0 46.1 46.6 46.6 23.8 46.9 46.7 49.4

6.1.4 Work intensity

6.1.5 Work-family balance

6.1.6. Health and Safety

6.2. Employment conditions among vulnerable group if compare to other group

6.2.1 A case study on retrenchment in Malaysia

The retrenchment that started as a trickle as a result of the relocation of multinational

Chart 1: Retrenchment (1997-2001)

6.2.2. Foreign workers

1990 1995 2001 2003 2004 2005

M ining 0.6 0.4 0.2 - - -

Total 100.0 100.0 100.0 100.0 100.0 100.0

Notes: * 19.8 per cent are employed in plantations.

Table 9. The number of foreign workers in Malaysia based on citizenship

M ental, physical and sexual torturing by employers

7. Policy directions on employment conditions among vulnerable group in the informal

7.1. Policy on retrenchment

7.2. Policy on part time workers

7.3 Policy on minimum wages

7.4. Policy on foreign workers

8. Conclusions: summary and prospects

In sum, based on the limitation in quantitative data on employment conditions among

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