• Malaysian Bureau of Labour Statistics
Inventory of completed work

Research and Development

Nurfarahin Harun; Muhammad Shafiq Harun

Box Article: Supplementary Measures Of Labour Underutilisation

Introduction

  • Over the years, the unemployment rate has been widely used to assess a country‚Äôs labour market situation. According to the International Labour Organization (ILO), (2016), the indicator is one of the best measures of underutilisation of labour supply as it reflects the inability of an economy to generate employment for those persons who want to work but are not doing so, even though they are available for employment and actively seeking work. In spite of being a popular indicator among the policy makers, media and the public alike, the indicator has also come under a lot of criticism.
  • Earlier on, Lovati (1976) commented that the unemployment rate tends to overestimate the extent of economic hardship since other factors could influence this such as income and savings as well as social safety net. Adding to this, Ham (1982) perceived that aside from unemployment, the labour market could also be hindered by firm reducing hours worked, leading to employees working less hours than they were willing to, thus causing lower compensations and wages. Meanwhile, Blanchard & Portuga (2001) found the same unemployment rates in the United States and Portugal indicating very different labour market scenarios where unemployment duration was three times longer in Portugal than in the United States.
  • According to ILO (2016), in order to ensure formulation and implementation of holistic labour market policies which would simultaneously benefit the workers and progress the economy, it is pertinent to recognise, measure and evaluate the strengths and inefficiencies that exist within that market. In this regard, one of the things that need to be further assessed is the extent to which the economy is fully utilising its available labour supply.
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