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Labour shortages in the retail industry have become a global issue that many businesses are grappling with. In Malaysia, as in many other countries, there are multiple factors to blame, including low wages, poor treatment of staff and lack of foreign workers. Professor Geoffrey Williams, an economist at the Malaysia University of Science and Technology (MUST), told Inside Retail that the current situation can be traced back to the lockdowns during Covid-19. “Malaysian retailers are
rs are dependent on foreign workers who were sent home during the pandemic with little or no warning or compensation,” he said.
He believes that many of these workers are reluctant to return because of the poor treatment they received during the pandemic, and local workers are not rushing to fill the roles because salaries are low and career development opportunities are limited.
For example, a franchise of an international retail chain recently posted its salaries, including RM2,400 (US$528) for a retail associate role, and RM2,800 (US$616) for a senior retail associate role.
To put this in perspective, in 2016, Malaysia’s central bank estimated a living wage to be RM2,700 (US$594) for a single person.
“Taking inflation into account, the living wage [today] would be closer to RM3,200 (US$704), whereas their salary for a supervisor was only RM3,400 (US$748), so these barely provide enough to live on,” Williams pointed out.
He believes the solution is sitting in plain sight.
“The solution is simply to pay better salaries,” he said.
“There are more than enough people. Malaysia has three million unemployed or underemployed [people], and 7.2 million [people who are] outside of the workforce. The salaries offered in retail are simply too low to meet basic income levels.”
While the local government has enacted laws to bring in a mandatory minimum wage, Williams said it is too low to make much of a difference, and in fact, it could end up keeping salaries down.
“Liberalisation of labour markets across borders could help, but ultimately it is for companies to raise salaries and terms and conditions of service,” he said.
Williams hopes that employers will raise salaries and improve opportunities for workers in this sector, but he doubts it will happen without pressure from consumers.
“What is lacking is [an incentive] to call out bad pay,” he said. “Customers don’t care about the salaries of warehouse workers, cleaners, checkout staff or other people in retail outlets. They just want low prices.”
At the same time, he believes owners and managers of retail outlets have a strong reason to keep wages down to increase margins. In his mind, this is an age-old problem, but ultimately shows a failure of leadership and management.
“Retailers regularly post record breaking profits while paying poverty wages to their staff,” he noted.
A fluid landscape
According to Professor Lim Weng Marc, a dean at Sunway University’s Sunway Business School, employment in the retail industry has traditionally been very fluid, with many frontline employees staying in the sector for a few years before moving on to other jobs.
“More often than not, people treat the retail industry as a temporary solution or a stop-gap in employment before they land a job that they truly would like to work in,” Lim told Inside Retail.
Beyond such existing challenges, however, he said there are three additional reasons for the current retail labour shortage in Malaysia. First, both local employers and employees have become equally choosy these days.
“Employers want to employ locals who are younger as they are more energetic and willing to do more than expected while also expecting the kind of extensive experience that the young do not have,” he said.
Likewise, he has observed that employees want to work for employers who provide high salaries and good work-life balance that do not really exist in the retail industry.
Second, Covid-19 has instilled a psychological fear of physical interactions, making frontline retail jobs unattractive, especially among locals.
Third, the retail industry often requires frontline employees who are multilingual.
“Labour supply from countries such as Bangladesh, Indonesia, and Myanmar where Malaysia commonly recruits from, do not speak good English, Malay, or Mandarin, which makes them unattractive for employers in the retail industry,” Lim noted.
Even if this weren’t the case, Malaysian retailers would still be susceptible to bottlenecks as governments have been slow to respond to the needs of the industry.
“Work permits and visas are still at a bottleneck, which makes it difficult for employers who are willing to pay to recruit employees from abroad,” he observed.
Lim feels that it’s time for a systems-based solution to the problem at hand.
“At the individual level, I believe that all frontline employees should be incentivised. That way, the more proactive the frontline employee, the more the retailer will earn, and the more the frontline employee will be remunerated,” he said.
Moving away from traditional sales targets and moving towards a gamified incentive system would appeal to younger generations and get them excited to work in retail.
“Co-creating solutions, for example, in making the retail atmospherics ‘Instagram-able’ and ‘Tik-Tok worthy’ should also foster a sense of belonging, ownership and by extension, attachment with the retail brand,” he added.
At the organisational level, he believes retailers need to do a better job planning and communicating the long-term career opportunities in their sector.
For instance, younger generations increasingly aspire to an active and global lifestyle. Why don’t retailers highlight the opportunity for employees to travel and move around different retail outlets?
Is automation the holy grail?
There has always been a school of thought that automation will be the ultimate solution to the problem of labour shortages in the retail industry.
As far as Lim is concerned, automation and digital transformation are simply overrated.
“The reality is that jobs evolve along with technological advancement and societal practices over time. In this regard, a proactive mindset to learn, unlearn, and relearn along with opportunities and support for upskilling and reskilling will be very much needed,” he said.
Meanwhile, Williams believes that automation and digitisation can be used to perform certain functions – in warehouses and at checkouts for instance – but they can’t replace all retail workers. At the end of the day, customers want human interaction in stores.
On a positive note, he said that automation and digitalisation can improve efficiency and help reduce costs through better management and planning options.
“If these cost reductions are passed on in higher salaries, then recruiting would be easier,” he said.
“Unfortunately they are more likely to be held in order to gain higher profits so this won’t solve the recruitment problem.”
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