Employment to Population RatioClick here for detail indicators
Introduction & Background
This ratio provides the answer to the question: "What proportion of the working-age population is employed?". In Malaysia, the working age population is composed of persons 15-64 years old.
Relationship to the employment level. While the employment level reflects net changes in the number of jobholders, the employment ratio show net changes in the number of jobholders relative to changes in the size of the population. Because the population is continually growing, a rise in employment may or may not appear as an increase in the employment-population ratio, while a decrease in employment will always be reflected as a decline in the ratio.
Relationship to the labour force participation rate (LFPR). The LFPR reflects the proportion of the population who want to work, whereas the employment ratio measures the success of the economy at creating jobs.
Relationship to unemployment rate. A lot more attention is focused on the unemployment rate than on the employment-population ratio. However, the concept of unemployment is fuzzier than that of employment.
To be counted as unemployed, a person must be without a job, be available for work, and have actively sought a job, or must be on layoff expecting re-employment. To be counted as employed, a person must have worked at least 1 hour during the week for pay or profit (or at least 1 hour as an unpaid worker in a family business), or have a job but is temporarily absent from it. In other words, being employed is an observable experience, while being unemployed often lacks that same concreteness, i.e. seeking a job is not as clear-cut a condition as having a job
The employment to population ratio is presented as a percentage of the relevant population. Members of the armed forces and residents of penal and mental institutions may be excluded. The ratio is further disaggregated by gender; by age groups (usually youth (15-24 years) and adults (25-64 years); and by states or geographical areas. The data for calculating the employment ratio is captured through the Labour Force Survey conducted periodically by the Department of Statistics Malaysia (DOS) using the household survey methodology.
Why KILM 2 is important?
This ratio measures the economy's ability to provide jobs for a growing population and is useful for evaluating demographic employment trends. Put simply it measures whether jobs are being created fast enough for those who want to work. Thus a country with a higher ratio can be said to be more successful in creating jobs to meet the needs of its citizens. Accordingly, persons who are not in employment status are either classified as the unemployed or they choose not to participate in the workforce at all.
While a high overall ratio may be considered positive, by itself this is not sufficient to assess if decent work is being created or if there are deficits in decent work within the workplace. Additional information would be needed for such assessment including worker earnings, hours of work, presence of informal sector employment, underemployment and working conditions.
Overall, the employment ratio in Malaysia at 63.6 % in 2012 appears to have stagnated as it already stood at 63.5% in 1990. During this period the ratio has tended to fall and was as low as 61% in 2005 only improving marginally to 61.6% in 2010. Since unemployment has been relatively low in Malaysia, this implies that a large part of the population is not participating in the labour force, especially the female population, as depicted by the LFPR under KILM 1. This reflects that while the country has been effective in creating employment as Malaysia progressed towards middle income status, the rate of job creation has been lower than desired as the trend in the ratio is pointing to employment barely keeping pace with the growing population. The rate of employment creation has been quite variable, largely because of the effects of the various global economic crisis that Malaysia has suffered, the latest being the global financial crisis as reflected in the 2010 ratio. More importantly, the stagnant or decline in the employment ratio points to the need for structural changes to drive new growth areas for augmenting the job creation potential of the country, improve LFPR and liberate the economy from the middle-income trap.
Overall, the employment ratio in Malaysia at 63.6 % in 2012 appears to have stagnated as it already stood at 63.5% in 1990.
Depending on the frequency or timing in the collection of data, seasonality may affect employment creation and thus lead to variations in the employment ratio which has to be appropriately accounted for (for example, employment usually spikes whenever there are festivities such as Eid Mubarak and Chinese New Year). Also when comparing this ratio between countries, variations in the definitions of employment, the population (age bracket, armed forces, etc) and collection methodology (LFS versus household census) have to be taken into consideration.
Other than the general aggregate working age population and employment, which includes both Malaysian citizens and non-citizens, it may be useful to separate the employment ratio to allow a focus only on the situation of citizens. This may contribute to better targeting of policies to improve the skills and educational needs of the youth population to meet market demand and also to support job creation in economically lagging regions/states. It would also be useful to benchmark the trend in various facets of Malaysia’s employment ratio with surrounding Asian economies and other similar countries elsewhere in the world.