The Effects of Occupational Differentials: Between or Within Industrial Effects?

Abstract

In this paper we attempt to contribute to sectoral-level evidence on the change of the employment share and wage premium of professional and technical workers in Malaysia. The set of data employed in the paper comprises micro-level data from the Household Income Survey (HIS) for the years 2002–2007. We investigated the changes in skill structure between professional and technical workers in Malaysia between 2002 and 2007. Using the decomposition approach this study showed that the driving force of changes in employment structure is intra-sectoral, and the effects were reflected in the change of individual sectors. Interestingly, the paper has two main findings from these decompositions. First, by comparing inter and intra effects, we concluded that the intra-industry impact (within industries) or the movement of technology was more dominant in explaining decreasing changes in the relative demand for professional workers. The inter-industry effect (between industries) favours technical workers rather than professional workers. Across fifteen sectors that were used in this study, manufacturing, wholesale, and social work industries show a clearly decreasing demand trend for both professional and technical workers. Technological change is the most influential factor among these changes. This result indicates that shortages in the supply of professional workers lead the government to encourage the influx of foreign workers into the country. Second, this study found that the demand for professional workers in human health, education and public admin and defense sectors showed an increase in relative demand during the sample period 2002–2007. This result is consistent with the vision of the national policy in the Ninth Malaysian Plan, and in line with the aspiration of producing a ‘first class mind’ community.