Sources of labor growth in Malaysian manufacturing sector

Abstract

The manufacturing sector plays an important role in Malaysian industrial development. High growth rates and technology expansion in the manufacturing sector resulted in a substantial increase in demand for labor. This process of rapid growth and changes in the demand for labor were also accompanied by changes in labor structure and skills. At the same time, the range of activities and products became more diversified and, correspondingly the composition of manpower sub sectors changed significantly. This study employed the input-output Structural Decomposition Analysis (SDA). The analysis computed the compositional manpower change as a result of decomposition. The result of this study indicates that sources of labor growth in the manufacturing sector were favored by changes in the final demand structure. Within the changes in the final demand structure, changes in domestic demand structure were the dominant source of employment growth between 1978 and 1991 and the overall period 1978-2000. However, from 1991 to 2000, employment change was due mainly to changes in export structure. Changes in the structure of domestic demand had a relatively strong and increasing effect on service workers, production and related workers, transport equipment operators, laborers, and clerical and related workers during the 1978-1991 period. Changes in the export structure were the main factor that had an increasing effect on the employment of high skill workers and sales workers. However, during the second sub period of 1991-2000, manpower growth was exports structure driven.