Adapting to Change: How Malaysia’s Workforce Can Balance Migration and Automation

The World Bank report finds that migrant labor fills crucial low-skilled roles in Malaysia’s economy, complementing local workers, while automation, though encouraged to reduce reliance on foreign labor, faces high costs and gradual adoption challenges. As Malaysia ages, demand for migrant labor will likely persist, with policies needed to balance technological advancement and workforce integration.

The World Bank's recent report delves into the interplay between migration, technological change, and workforce dynamics in Malaysia. With contributions from researchers including Amanina Abdur Rahman, Simon Bilo, Shreya Chatterjee, and Natalie Fang Ling Cheng, the report examines how Malaysia’s path to high-income status, combined with an aging population and rising education levels, affects the demand for migrant labor and automation. Historically, Malaysia has relied on migrant workers to fill low- and mid-skilled roles, especially in sectors labeled "dirty, dangerous, and difficult" (3D jobs), like agriculture, construction, and manufacturing. As more Malaysians attain higher education, many are less willing to take on these roles, resulting in a significant demand for low-skilled migrant labor. The country’s demographic shift toward an aging population intensifies this need, as a declining working-age group requires all available sources of labor, including migrant workers, youth, and women. Despite this reliance, there is growing public concern about the impact of migrant workers on local employment, productivity, and wage levels, leading to policies like the 12th Malaysia Plan and the Madani Economy Framework aimed at reducing dependency on low-skilled foreign labor by promoting automation and greater local workforce participation.

Migrant Workers: A Crucial Support for Malaysia’s Workforce

Contrary to the belief that low-skilled migrant labor lowers wages and reduces job opportunities for Malaysians, the report reveals that migrant workers play a largely complementary role in Malaysia’s economy. Migrant labor has filled critical gaps in labor-intensive industries, allowing higher-skilled Malaysians to focus on specialized roles that offer wage premiums. Evidence shows that the employment of migrant workers is linked with increased employment and reduced unemployment for Malaysians, particularly for workers over 30 and those with secondary education, suggesting complementarity between the two groups. Additionally, foreign domestic workers may contribute to the participation of women in the Malaysian labor force by relieving domestic responsibilities. Studies show that the negative impact of migrant labor on Malaysian wages is modest; low-skilled foreign workers appear to have only a small effect on the wages of similarly low-skilled Malaysians. In fact, hiring migrant workers often promotes job creation for Malaysians and boosts economic activity through increased domestic consumption. The report suggests that migrant labor in Malaysia supports sectors where Malaysian participation is declining, such as agriculture, where younger, educated Malaysians are less interested in employment.

Automation: Potential, Challenges, and Limitations

Malaysia has yet to see significant adoption of automation technologies, even as the government has promoted its National Robotics Roadmap and aims for the country to become a regional robotics hub. The report highlights that high costs and limited expertise impede widespread automation adoption, especially for small and medium-sized enterprises. Although automation is promoted as a solution to reduce dependency on migrant labor, the research finds that actual implementation is complex and context-dependent. Automation could theoretically reduce demand for low-skilled workers by taking over routine tasks. However, studies show that automation’s real impact varies: it often increases productivity, creating new labor demands in non-routine, higher-skilled tasks. Examples from Spain and France demonstrate that automation may lead to job growth across skill levels rather than simply eliminating jobs. In Malaysia, roughly half of the workforce holds jobs susceptible to automation, yet barriers such as prohibitive costs and limited access to technology mean that automation may not fully replace migrant labor in the near term.

Comparing Malaysian and Migrant Job Vulnerabilities

The report finds that migrant workers in Malaysia are more likely to hold positions involving routine tasks, making them more vulnerable to automation. However, due to the size of the Malaysian workforce, automation may ultimately impact a larger number of Malaysians. Malaysians generally have access to less routine, higher-skilled jobs compared to equally educated migrants, suggesting they may be less affected by automation. Migrant workers are more likely to occupy low- and mid-skilled roles in sectors like agriculture, where automation of routine tasks could theoretically replace jobs, but where barriers to automation persist. The findings show that while higher-educated Malaysians are less likely to be affected by automation, many Malaysians still work in roles susceptible to technological change. There are more Malaysians than migrants in mid-skilled jobs with routine tasks, indicating that automation could disrupt Malaysian workers in these roles if adopted on a large scale. With Malaysia’s rapidly aging population and low birth rates, migrant labor will remain essential, regardless of automation’s trajectory.

A Measured Approach to Automation and Migrant Labor

The report concludes that while automation may change the type of labor Malaysia needs, it will not eliminate the demand for migrant labor. The researchers suggest that Malaysia’s foreign worker management system should be refined to become more demand-driven, using transparent policies like tiered levies to regulate labor needs. Policymakers must prepare both Malaysian and migrant workers for a rapidly evolving job market by investing in skills training and lifelong learning opportunities. Social protection programs for informally employed workers could further protect those affected by job displacement due to automation. In a broader context, understanding public perception toward migrant workers will be key, as negative sentiment persists despite evidence of migrant labor’s positive impact on the economy.

Shaping Public Perception and Supporting Workforce Resilience

Educating the public and aligning migration policies with economic needs can help Malaysia navigate the complex interplay of migration, automation, and an aging population to create a more resilient and productive labor market. In addition to addressing economic needs, the social and political feasibility of migrant labor will be essential to its continued integration into Malaysia’s economy. Addressing public concerns and reshaping perceptions of migrant labor are important to ensure that migration policies align with the country's broader economic goals and demographic realities.