While I applaud Noor Yahaya Hamzah for his bold call to reduce low-cost labour immigration to help solve Malaysia's graduate unemployment problem, his economic logic is flawed.
Malaysia is already under economic siege. From one end, it is being squeezed out by low-cost mainland Chinese manufacturing that is getting better everyday. From the other hand countries that used to be peers like Taiwan and South Korea are climbing so far up the value-added ladder in electronics that we now have little hope of catching up. The poster boy for Malaysia's slow decline in manufacturing is Penang.
For Malaysia to shut out all our cheap labour sources and to hope that by doing this, we can 'force' ourselves up the value-added ladder is pure economic fantasy.
Taiwan has had access to low-cost Filipino labour for a long time but they have improved much faster than we have. On the other hand, Malaysia has spent untold billions in attempting to increase our higher value-added sectors since the 1990s (remember the Multimedia Super Corrdor?) and still, we have gone nowhere.
To shut out migrant labour is similar to raising trade barriers and letting our 'national resources' determine market prices. In an economy as exposed to global headwinds as Malaysia's, that is tantamount to economic suicide.
Secondly, I disagree that the Indonesian maids or the Burmese construction workers are the source of the problem. I blame the NEP and our racially-guided education quota policies.
Let's just say for the sake of the argument that maids and construction workers will get paid RM5,000 if we shut out all foreign workers. Let's also say that Malaysian graduates put aside their prejudices and start taking on these jobs due to the high pay. These jobs hardly require a degree in Biology or Sastera Melayu.
That begs the question why did the government spend so much time and effort to put them through university?
This is why I blame the NEP. Some economists have called university education a 'signaling' tool to employers. In other words, an employer doesn't give a hoot about what a graduate has really learnt at university. The degree is seen as a 'signal' that the graduate is a person of higher quality than a person without a degree.
When the government, in its aspiration to make the bumiputera more competitive in the job market, forces universities to 'manufacture' a targeted number of graduates from a certain race, the whole 'signaling' mechanism breaks down.
Employers now cannot tell if a bumi university graduate is really of quality or if they were just the lucky by-product of a quota system. So, no wonder there are accusations that certain employers are 'racist' they hire non-bumi grads more than bumi grads. But of course those non-bumi grads are the only high-quality people that an employer can be sure of.
In the end, the education quota policy hurts the bumi more than the non-bumi. Bumis who would have gone on to university even if there was no quota system are now 'tainted' with the impression that they never deserved it in the first place.
Bumis who would not have gone had there not been the quota system still can't find a job after they graduate. In the meantime, these people have spent so much time and money only to be told they should work as overpaid maids or construction workers.
If we really want to let market forces run, then let meritocracy decide who should get places in our local universities. Everyone and his grandmother has an opinion for or against meritocracy, but here is an example of how non-meritocracy has actually hurt the people it was supposed to help.
The biggest economic threat to Malaysia in the next 20 years is not the rise of China and India. It is the NEP.
