Economic Determinants and Foreign Labour Force: Evidence from Malaysia

Abstract

Malaysia is facing a critical shortfall of labour in several sectors such as construction, manufacturing and services. In particular, the 3D's jobs, namely 'dirty, dangerous and difficult' jobs, are not well filled by local workers due to employers' unwillingness to raise wages and improve working conditions to minimize firms' cost. Instead, the firms tend to employ foreign labours to fill the shortfall and meet the market demand. Hence, this study aims to examine the relationship between economic determinants and foreign labour force in Malaysia. The four selected economic determinants are unemployment rate (UNEMP), gross domestic product (GDP), foreign exchange rate (FOREX) and labour productivity (LPY). The secondary data covering 18 years from 2001 to 2018 is tested and analyzed using descriptive, correlation and multiple linear regression analyses. The findings reveal that the GDP and FOREX have positive relationship with Malaysia's foreign labour force whilst the UNEMP and LPY pose negative relationship with the foreign labour force. However, only GDP and LPY are found to have significant relationship with foreign labour force in Malaysia. The findings have implications on and are beneficial to the policy makers and business firms in coming up with any measures pertaining foreign labour in Malaysia. The findings will also add more knowledge and references to the existing literature.