Labour Market Segmentation in Malaysian Services

5. Conclusion: The Anatomy and Dynamics of Labour Market Segmentation

Conclusion 133 5 Conclusion: The Anatomy and Dynamics of Labour Market Segmentation Although the Malaysian economy has been undergoing rapid change since independence, its experience of structural change does not closely follow the three-stage model of economic growth, i.e. that of extractive industries leading to manufacturing and then later to services. As this study has shown, the service sector has always been significant from the early stages of economic development. The sector’s importance expanded rapidly with the more interventionist role taken by the state with the launch of the NEP in 1970, which also redefined the nature of segmentation in the Malaysian labour market. Given the historical and contemporary economic, social and political inequalities in the country, ethnicity, class and gender determine the level and types of skills; the more urbanized Chinese tend to be more middle-class and have better access to better urban schools and other related facilities, and are thus more likely to possess higher education qualifications. Similarly, their longer history of involvement in trade and artisan activities provides established informal training channels for skill acquisition through the apprenticeship system. Gender is still important in determining educational opportunities and choices of skill-acquisition for women. Their lower market status and lower “offer price” are often due to the prevailing view of women’s contribution to family income as supplementary. Segmentation tends to evolve from the structure of labour demand, which is affected by: (i) the structure of the product market, (ii) ownership of the production unit, (iii) the industry’s market structure, (iv) the relative 133 134 Labour Market Segmentation in Malaysian Services costs of inputs, including different types of labour, (v) technological choice, (vi) externally-imposed human resources regulations and policies by the state or unions or professional associations, (vii) the state’s economic and political policies. These factors are not mutually exclusive; the product market structure; industrial market structure, relative costs of inputs, the state’s industrial policies (in terms of tax breaks and subsidies) and labour legislation affect the choice of technology through the firm’s ability to pay, while segmentation of the market for some services is related to ownership segmentation. Moreover, product market segmentation (e.g. by ethnicity, class and gender) and industrial market structure (e.g. by firm size) encourage labour market segmentation in terms of different conditions for entry systems, pay, job security and career prospects. However, the structure and level of labour demand may not be alone in determining employers’ hiring practices, which may also reflect imperfect information and employers’ preferences among similarly qualified workers. A worker’s job opportunities are determined by: (i) supply factors, including labour market status and access into different labour markets segments, (ii) demand factors, i.e. employers’ hiring practices, influenced by information and employers’ preferences. An employer’s demand is determined by: (i) their ability to offer remuneration, career prospects and non-pecuniary benefits, (ii) the minimum offer price (wage) of the desired worker. Hence, the real wages reflect the relative bargaining power of employers and workers. The labour market status of workers, and hence their relative bargaining power, may be directly strengthened by trade unions, professional associations, legislation, and, in the Malaysian context, “artificial shortages” of particular ethnic groups of workers owing to state interventionist labour policies. The Malaysian service labour market clearly exhibits these characteristics and the reviews in Chapters 3 and 4 reveal that segmentation changes over time due to structural changes. The Malaysian labour force has long been segmented by ethnicity, religion, language, custom, class and gender. Such segmentation is reflected in employment in the services sector. Malay over-representation in community, social and personal services was due to their greater participation in public sector employment, where they accounted for much more than two thirds of the government workforce and over half the total labour force. The Chinese’s long involvement outside of the commanding heights of capitalism is reflected in their concentration in wholesale/retail and finance/business services, where they long accounted for half of the commerce and almost half of the financial services workforce, although they now account for less than a third of the Peninsular Malaysian workforce. The Indians were historically concentrated at the lower end of government services, as reflected in their overrepresentation in transport, storage and communications, higher than their Conclusion 135 share of the labour force. Similarly, the occupational crowding of women, the lower classes, immigrants and...