The Determinants of Labour Productivity Growth in Malaysia

Abstract

Productivity of a country measures the country's capacity to create more money or value added. Malaysia is expected to shift to a high-income economy between 2024 and 2028, reflecting the country's economic development trajectory during the previous decades. As Malaysia strives to become a developed country with a high standard of living, great productivity in manufacturing processes is critical. The aim of this research was to investigate the factors could have impact on Malaysia's labour productivity. The research was performed using secondary data from economic indicators, which were the real wages, inflation, foreign direct investment (FDI), unemployment, and employment rate. The research sample use a time-series data on Malaysia's labour productivity from 1990 until 2020. According to the results, there were three significant factors, which were the real wages, foreign direct investment and inflation rate, while the unemployment and employment rates were not significant. The real wages, foreign direct investment, and employment rate, showed a positive correlation. Meanwhile, the inflation rate and unemployment rate showed a negative correlation with labour productivity. This study will reveal some of the factors that will affect the labour productivity and may help the government to create policies to manage the crucial contributor of labour productivity to increase the countries' gross domestic product.