SEPTEMBER 11, 2020

REFSA urges government to improve social protection and play a proactive role in creating jobs in strategic sectors

by refsa 

“REFSA’s response to the UNICEF/UNFPA study “Families on the Edge”

Kuala Lumpur, 11 September 2020 – The coronavirus crisis and the ensuing movement control order (MCO) have deep negative ramifications for many Malaysians, especially vulnerable, low-income families.

With the exception of the headline news: a thirty-year peak in the unemployment rate and a contraction of quarterly GDP of over 17%, detailed evidence of the extent of these ramifications has been largely absent – until now.

The recent UNICEF Malaysia and UNFPA report, entitled ‘Families on the Edge’, is the first longitudinal study on the post-MCO socioeconomic and mental wellbeing of low-income households in Kuala Lumpur. It paints a troubling picture. Combined with other recent, albeit pre-MCO, research on low-income Malaysia, there are compelling reasons for the Malaysian government to do more for vulnerable groups.

Echoing the findings of this study, Research for Social Advancement (REFSA) agrees that steps must be taken to ‘significantly strengthen Malaysia’s mainstream social protection framework.’

Additionally, we concur there is an urgent need to reform the labour market in order to create more sustainable, long-term and respectably-paid jobs, especially in strategic sectors including education and healthcare, as well as sustainable agriculture, energy, transport, and waste management.

In this vein, the government should introduce schemes aimed at upskilling the labour force, and preparing Malaysian workers for careers in such sectors. We believe such programs could be carried out by expanding selected aspects of the public sector that could create new jobs for Malaysians while fulfilling several long-term demographic and technological challenges that Malaysia faces, as detailed in the recent REFSA Brief published in August 2020. 

Amongst the UNFPA-UNICEF findings, one of the most important in our mind is that low-income households have been facing financial difficulties even before the virus struck. It was found that 16% of the households surveyed were unable to afford sufficient food, 39% had trouble paying rent or installments, and over half had outstanding utility bills as of the end of last year.

The pandemic has made the situation worse for these households, with three-quarters of them unable to save money during the MCO. Of those who managed to save, only a fifth stashed away enough to last more than three months. Even worse, amongst households headed by women only 5% saved enough to last as long. The pre-existing financial challenges faced by low-income households threaten to deteriorate further if consequential action is not taken.

These findings are backed up by other earlier studies on low-income Malaysia, conducted by Khazanah Research Institute, the World Bank, and UNICEF itself, as well as numerous academics. Indeed, in our own research on low-income Malaysian households, REFSA has found that a family of four with two working parents earning the median wage would fail to reach its living wage requirement in almost every state.

Overwhelming evidence thus supports the idea that social protections must be improved for Malaysia’s vulnerable populations. Recent months have seen attention paid to the benefits of universal (or targeted) basic income schemes across the world.

We believe local low-income families would benefit from the expansion of Malaysia’s existing cash assistance framework, Bantuan Sara Hidup (BSH), to better cater for the needs of low-income families. Replacing the existing BSH policy with one which pays out RM1,000 to B20 households and RM500 to B21-40 households each month would come at a cost of RM30bn annually, just a tenth of the value of Malaysia’s post-Covid stimulus packages since February – a fraction that will decrease should further stimulus be deemed necessary.

While cash assistance is a key part of the equation, it should not be the only tool used to raise the living standards of low-income households.

Equally important is access to decent work. The UNICEF study reveals ‘considerable demand for proactive labour market interventions that support people to get back into employment.’ The Malaysian government can play several crucial roles in this regard: 

1) First, it can ensure the creation of jobs in strategic sectors such as education, healthcare, and the green economy by stimulating investment in these sectors. 

2) Next, it can ensure the creation of a labour force capable of becoming teachers, or nurses, or care workers, or engage in the manufacture, deployment, and maintenance of green technologies, amongst many other possibilities, by employing a host of training programs targeted towards each specific niche in order to ready the labour force for work in these sectors.

Labour market reforms which see Malaysia reduce its reliance on foreign workers, particularly for lower-skilled jobs, can also create myriad job opportunities for locals.

Coupled with stimulating improvements in pay levels by, for instance, raising the minimum wage further, this can create opportunities for low-income individuals to attain steady work and mitigate the financial difficulties they face.

Otherwise, these difficulties – which pre-date the pandemic – will only get worse until a vaccine is found for the coronavirus and the threat of further MCOs dissipates.

The government has its work cut out. The pandemic has had an outsized toll on low-income households across the world. They were already struggling to get by before it struck. Now, these struggles have only amplified.

The stimulus packages, including Bantuan Prihatin Nasional (BPN), a system of cash transfers to low-income individuals, have helped, but such emergency, one-off measures should be replaced by a basic income provision targeted to the most vulnerable in our society.

Beyond that, the government should embark on massive job-creation and training schemes that can ready its labour force for decent, well-paid work in strategic, future-proof sectors.

Among the key findings from the UNFPA/UNICEF Report: 

1. The unemployment rate amongst heads of low-income households, at roughly 25%, is five times the national average. For female heads of low-income households, the rate is 32%.

2. More than half of these heads of low-income households have no labour market protections (e.g. EPF and SOCSO), while three-quarters lack employment protections (presumably the Employment Insurance Scheme, though what this entails is not explicitly described in the report). More worryingly for women, only 5% possess medical and life insurance.

3. Compounding the concerns of low-income households is the fact that median salaries dropped by a third during the MCO, with over half of heads of households reporting a reduction in income relative to 2019.

4. At the same time, only a quarter of households managed to save money during the MCO. Even amongst this group, just 16% of households saved enough to last more than three months.

5. Low-income households have subsequently been forced to curtail expenditure where possible. Spending on education is, on average, down 84%, a factor which can have negative long-term repercussions and even fortify the vicious cycle of poverty. While food expenditures did not change much on aggregate, the composition of food consumption did: low-income households have been found to have curtailed their consumption of both fruit and protein, both crucial components of a healthy and balanced diet.