The age of cheap labour for Malaysia is over

Recently Malaysia and many countries are facing serious labour shortages in various sectors like F&B, hotels and factories.

I am going to explain things that happen last 10 to 20 years that lead to where we are, the three things that contribute to this problem are house price, birth rate and wages.

The first thing we going to talk about is the house. it is important to understand that in any culture, men need to secure a house before he married a woman. While some couples will married and still rent a home, the majority would rather secure a home only than married. Having a home is a show of stability to a woman as raising kids required resources.

The problem is nobody building low-cost houses for the lower income worker.

With the house no longer affordable to many low-income men, most will stay single or try to aim for higher-income job.

The rising cost of house and living has resulted in the decline of the birth rate. Since 2013, Malaysia's birth rate went below the 2.1 replacement level.

This means as time passed, the number of young workers that will replace the old worker will get less and less.

I going to use this as an example, in any society or country, there will always be classes like a low, middle and high. To maintain the current prosperity, a certain number of low-class worker is needed to be keep things running.

However if one day the amount of workers went below 600, somebody from the middle and high class needs to replace them or the system will collapse.

From here on, there will be 2 scenarios that will happen, a peaceful ending or a bad ending. Either way, it is part of the market way of fixing this problem.

The peaceful ending

The leader will make wages for the low class will be increase or house within their affordability is built.

The bad ending

If the top class continue to do stupid policy, those top and mid-class who found themselves at the risk of downgrading to the low class will revolt and offer the low class higher pay to take down the useless leader.

After things settle, a new social contract will be agreed upon among all the classes.

Historically, this is how thing play out throughout human civilization.

Conclusion

All the employers in Malaysia have less negotiation power on the table for the next 5 to 10 years. Refusing to give living wages will only make the future cost of hiring higher.

The Foreign worker can't save the situation because depending on foreign worker will only weaken the ringgit, they will send the money back to their country. As ringgit drop in value, less foreign workers will want to work in Malaysia.

I predict wages will continue to increase until it can afford the cheapest home even when there is a recession. Because even during the recession, you need somebody to keep thing running or thing will get ugly.