Tag: labor

Categories
Economics Science & technology

[2897] Two-tier regulations to enhance ridesharing as a shock absorber in the Malaysian labor market

The gig economy can be many things but within the realm of ridesharing, I see it primarily as a shock absorber in the labor market. That means ridesharing is a temporary fall back plan if you have trouble in the formal market or in between jobs.

Here is an example of ridesharing as a shock absorber: if someone lost an income through job loss, he or she would not suffer 100% immediately because he or she could go to ridesharing without much cost. This shock absorber can be a minor alternative to unemployment benefits, except it comes as no cost to the government.

Because of this, I prefer to have flexibility in the ridesharing sector. Regulations could reduce the flexibility and reduce the effectively of the ridesharing sector as a shock absorber.

Yet it is quite clear that there is a need for labor protection. Regulations do have a role, especially since there is an asymmetry of bargaining power between those driving and the owner of the platform, driving by technology. In the case of food delivery, which is also a part of the gig economy, Foodpanda has market power over its food delivery workers and that market power was only matched with its deliverers’ union-like organizing successes.

When it comes to ridesharing, it does seem current regulations are reducing such flexibility and hurting the role of the sector as a labor market shock absorber. This inflexibility is caused by the need to register with the government if a person wants to participate in the ridesharing economy by driving.

Grab certainly blamed the new ridesharing regulations for reduced number of drivers on the road. This seems to be backed by complaints made by passengers over longer waiting time and higher fares. I personally I have suffered longer waiting time and higher fares, compared to before the regulations came into place. Talking to former drivers have also convinced that there are those who chose to cease becoming participants in the ridesharing sector. These point towards greater barrier to entry and hence, reduced flexibility.

I think as a compromise between the need for regulations and flexibility, perhaps there should be a two-tiers regulation:

  • For those earning below a certain threshold per month over x months, they could be exempted (partially?) from registration.
  • For those surpassing that threshold, they should be covered by current regulations fully .

The threshold is there to differentiate those doing ridesharing as a part time job and those doing it full time (or simply heavy participate of the gig economy). The shock absorber factor is more relevant to the part-timers than to the full-timers.

Admittedly, this will make implementation more complex and open the grounds for some non-compliance. There will be grey areas but I think in making the gig economy as a shock absorber, we should be tolerant of such non-compliance within some margins.

Implementation issues aside, theoretically this should be improve the role of ridesharing as a shock absorber in the labor market. It allows part-timers to join the gig economy without much cost, and making ridesharing sector as a temporary fallback.

Categories
Economics

[2664] More on actual weakness of the Malaysian economy in the fourth quarter

As I have written last week, Malaysia’s 6.4% real GDP growth from a year ago in the fourth quarter of the year hides actual relative weakness in the economy. Consumption growth, investment growth and government expenditure growth slowed. Trade contracted. What contributed to faster overall growth was that both exports and imports decreased in a way that made trade surplus erosion less bad.

That is from the demand side. The weakness can be also be seen from the supply side, specifically, from the labor market.

The Department of Statistics late last week released its monthly labor survey report, which does typically receive much less fanfare. The report simply backs up what I wrote, that economic growth in the fourth quarter was weaker than what the headline GDP number suggests. And definitely less of a bang than most politicians (and pro-Barisan Nasional journalists) suggest. But forgive them. It is an election year.

The average quarterly unemployment rate in the fourth quarter was approximately 3.1%, which was slightly higher than rates in the earlier quarters. Using the Department of Statistics’ seasonal adjustment method, the average quarterly rate came at 3.3%, and that created even more divergence when compared to seasonal adjusted rates in other quarters in the year. You can see the rates here:

2012DecUnemploymentRateQuarterly

It needs to be said that in the wider scheme of things, the unemployment rate is low. Just to stress on the grand-scheme-of-things perspective, here are the monthly rates which the quarterly rates are derived from (note the vertical axis and contrast it with the previous chart):

2012DecUnemploymentRateMonthly

Nevertheless, I think the actual weakness of the economy can be seen clearer in the retrenchment statistics as released by the by Ministry of Human Resources (which is an even less observed statistics in the financial industry):

2012Retrenchmentstatistics

That is a big jump. Not as big as those seen in 2009 recession. I have not run any regression to investigate this further but it does appear to say something about the economy in the fourth quarter.

Categories
Economics

[2111] Of no robot, just manual labor

Sitting outside of a library trying to finish up my sandwich under a bright sunny sky, I smirked.

Two reasons.

One — less important than number two and not quite the reason why I am posting this up — is an action that reminds me of fiscal stimulus mentality.

At the university, which is a public school, a small army of workers was redoing the pavement. Before the work began, I could find nothing wrong with it. It was built quite well and pleasing to the eyes too. Yet, there went the works. Although I can never be certain if that effort was funded by Australian stimulus money without further information, I am inclined to believe it was related.

And now, the new pavement awaits me, which splendidly looks and functions exactly that it was before.

It has to be related with stimulus program. It simply has to be. Nonsensical project, public works, the recipe of stimulus project is all there.

Of more interesting is that no robot was involved in the process of redoing the pavement. You might think that I am joking but I assure you that I am only half joking. No robot. No fancy machine. Just plain manual laborers working under the sun.

Where am I getting at?

If you have been visiting this blog for a very long time, you will notice that I am particularly peeved with some groups of Malaysians who rile up against the country’s so-called addiction to cheap labor. They blame general low wages in Malaysia is caused by the availability of cheap labor from abroad. Furthermore, due to availability of cheap labor, companies in the countries continue to not move up the value chain or not employ better technology. If only there is no cheap labor, Malaysia would be supremely technologically advanced and Malaysians would be better paid, or so they argue.

Well, here in Australia, one of countries with the highest GDP per capita in the world, no robot still. Just manual labor.

I could imagine those anti-cheap labor people saying “construction is but one industry and there are other industries that will employ better technology if only the cost of labor is greater than the cost of capital.”

Maybe, but I smirked still. And I am smirking now too.

Categories
Economics

[1881] Of hypocritical protectionist

Do not resort to protectionism they say!

KUALA LUMPUR, Jan 20 (Bernama) — Malaysia has cautioned World Trade Organization (WTO) members not to resort to protectionist measures as it can adversely impact the growth of global trade.

In making the call, Malaysia said countries should continue to adhere to their commitments to WTO when introducing domestic measures to counter the current economic and financial crisis.

“Malaysia remains non-protectionist despite the current global economic and financial crisis,” the Ministry of International Trade and Industry said in a statement here today. [Don’t Resort To Protectionist Measures, Says Malaysia. Bernama. January 20 2009]

And not 48 hours later:

Malaysia has banned the hiring of new foreign workers in factories, shops and other services.

The government said the move was to protect its citizens from unemployment during the economic downturn.

It has also told employers that if they want to cut back their workforce they must sack foreign staff first. [Malaysia bans foreign recruitment. BBC. January 22 2009]

It is hard to take the government seriously these days.

Categories
Economics

[1813] Of what is RM18 billion compared to RM100 billion?

In the Parliament, a Member of Parliament was concerned with the outflow of money due to foreign workers sending part of their wages back home. Finance Minister Najib Razak, in answering the MP, gave a piece of statistics which highlights the benefit of foreign workers.

PARLIAMENT, Oct 22 – Malaysia’s 2.1 million foreign workers repatriated RM9.11 billion for the first half of 2008 and Deputy Prime Minister Datuk Seri Najib Abdul Razak said the government expects it will total RM18.1 billion for the entire year.

“This averages out to RM720 per month sent home by each worker. However, the strong national reserve can withstand this as it amounts to just 4.7 per cent of our current reserve,” the Finance Minister told Parliament today.

He added that for every one per cent increase in foreign labour, Malaysia’s real Gross Domestic Product (GDP) grew by 0.19 per cent.

Datuk Halimah Sadique (BN-Tenggara) had asked if any action would be taken to address the outflow and whether the government intends to impose any levy or tax on it. [Foreign workers repatriate RM9 billion until June 2008. The Malaysian Insider. October 22 2008]

Let us see. It says 1.00% increase of foreign workers leads to 0.19% increase in GDP. With nominal GDP of Malaysia being approximately RM505 billion in 2007, that means an additional 21,000 foreign workers add almost RM1 billion to the GDP. Now, assuming there is a linear correlation, 2.1 million foreign workers add RM100 billion to the economy. That is about 1/5 of the GDP of Malaysia. Granted, a linear relationship is unlikely and I can begin to criticize myself for the careless use of statistics but it does give us an estimated benefit ceiling.

A slightly more accurate estimate which circumvents the validity of linear assumption is this: 21,000 foreign workers lead to an outflow of about RM180 million (RM720 per capita per month; 12 months; 21,000 workers). In comparison, these workers add roughly RM1,000 million (that is RM1 billion) to the GDP at this particular point of time.

So, what is RM180 million to RM1,000 million? What is RM18 billion compared to RM100 billion?

Assuming that outflow is a loss to the local economy, returns from wealth generation is, at most, 400% larger than the outflow.

As we all can see, support for the continuing usage of foreign workers is grounded on empirical data.