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UNFPA Report: Malaysia’s LFPR Gender Gap Higher Than Other OECD Countries; Female LFPR Among The Lowest In ASEAN

If the gap in labour productivity is not addressed, Malaysia runs the risk of being stuck in the “middle-income trap”, whereby significant labour productivity gaps hinder the transition of upper-middle-income countries to high-income country status.

KUALA LUMPUR, August 14 – In order for Malaysia to sustainably revive economic growth in the short term and long term, investments that leverage underutilised human capital potential must be prioritised, particularly for women, according to the UNFPA report, Enhancing Human Capital through Sexual and Reproductive Health Investments and Family Support Policies in Malaysia.

Despite their higher educational attainment rates, women continue to fall behind men when it comes to labour force participation rates (LFPR). In 2019, the total LFPR was 68.7 per cent, with female LFPR at 55.6 per cent, compared to males at 80.8 per cent. However, the country’s female LFPR has actually been increasing rapidly in the last decade, notes the report, with the current gap in LFPR between women and men at 25.2 per cent in 2019.

Despite the decreasing gap in labour force participation between men and women over the years, the gap is still significantly higher than that in high-income Organisation for Economic Co-operation and Development (OECD) countries. The average gender gap among high-income OECD countries was 11.7 per cent in 2018, half the participation gap in Malaysia. In most of these countries, the gender gap in LFPR is lower than 10 per cent.

Furthermore, Malaysia’s female LPFR is significantly lower than expected in light of the country’s advanced stage of development. The average female LFPR in high-income OECD member countries is 68 per cent, almost 13 percentage points higher than the Malaysian female LFPR. The country’s female LFPR is also lower than in most Association of Southeast Asian Nations (ASEAN) countries, where only the Philippines, Myanmar and Indonesia rank lower than Malaysia in female LFPR.

Evidence supports the fact that lower female LFPRs directly and substantially contribute to Malaysia’s productivity gap, especially after taking into account the underutilised labour potential of women with secondary and tertiary education.

The gap in labour productivity between Malaysia and other high-income countries illustrates the importance of investing in and mobilising female human capital for economic growth, maintains the report. In 2018, labour productivity in Malaysia was 48 per cent less than the OECD average and 65 per cent less than the Scandinavian average.

The UNFPA report defines labour productivity gap as the sustained difference in measured output per worker, or GDP per person employed, between one country and another. Productivity is a measure of the efficiency of factor inputs such as labour and capital.

If the gap in labour productivity is not addressed, Malaysia runs the risk of being stuck in the “middle-income trap”, a phenomenon that has been observed globally whereby significant labour productivity gaps hinder the transition of upper-middle-income countries to high-income country status. 

A primary reason women do not participate in the labour force is the difficulty of juggling work and family responsibilities. The UNFPA report cites the Fifth Malaysian Population and Family Survey Report (2014), which found that 32.4 per cent of the women who used to work and are now not participating any longer, report child care as the main reason for dropping out of the labour force. This underscores the significance of child care policies in facilitating female labour force participation. 

Since about 30 per cent of married women are not employed because of child care issues and half of them express a desire to work, as a ballpark estimate, childcare policies could increase the employment rate of married women by 15 percentage points, according to the report.This would lower the labour force participation gap between women and men to a level comparable to that currently observed in high-income countries.

The age profile of female LFPR also highlights the difficulties of retaining women in the labour force. The LFPR increases in early adulthood as women enter the labour force, but then steadily declines and remains at a substantial low level for older cohorts. 

This age profile suggests that women do not re-enter the labour force after getting married and having children, which is an  aspect of female labour force participation in Malaysia that has been documented at least since 1980, notes the report.

Comparatively, in a typical developed economy, female LFPR tends to decrease after early adulthood as women devote more time to their family but rises again as women re-enter the labour force. In Japan and the US, female LFPR remains relatively consistent from young to old.

The time spent out of the labour force because of child care duties inevitably diminishes the actual experience of a female worker, notes the report. Reductions in mistimed fertility can prevent the depreciation of female human capital that results from unplanned interruptions in labour market experience. 

If a woman can freely decide the timing of births, she can also minimise the negative impact of fertility on her workforce participation. In fact, reducing the uncertainty about the timing of birth can not only minimise the negative impact of bearing children on female human capital, but it might also increase fertility overall.

The UNFPA report argues that strategic measures must be implemented to enhance and mobilise female labour force participation and productivity in Malaysia, including the provision of high-quality child care services. 

Child care policies coupled with family planning interventions that improve women’s control over the timing of births are effective ways to improve women’s work/family balance, increasing both female labour force participation and satisfaction of labour force preferences.

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