The impact of foreign workers on wages: A case study of Malaysian firms

Rahmah Ismail, Ishak Yussof, Atif Awad

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The effect of migrant workers on the host country wages depends, among other factors, on the degree of the substitution or complementarity between migrant workers and native workers. The wages of the host country will decrease if migrant workers replace native workers; and if the labor supply is not perfectly elastic with respect to wages. The present study examines the impact of foreign workers on the wage rates of firms in Malaysia. The analysis is based upon data from 295 firms collected in 2011 through a field survey. The wage models developed are utilized to estimate overall wages; and the wages of four different job categories: managers; professionals; technical and associate professionals; clerical and general workers. Foreign workers are examined collectively and according to three job categories: skilled foreign workers, semi-skilled foreign workers and unskilled foreign workers. The results indicate that foreign workers have a negative and significant effect on the overall firm wages. However, when foreign workers are divided into skilled, semiskilled and unskilled, the results show that only the semiskilled and unskilled foreign workers have negative effect on overall wages. Foreign workers have a positive effect on wages for managers; professionals; and technical and associate professional, but the effect of foreign workers is negative on the clerical and general workers wages. The effect of foreign workers on wages is higher in the services sector and large size firms compared to the manufacturing sector and small size firms respectively.

Original languageEnglish
Pages (from-to)64-75
Number of pages12
JournalInternational Journal of Economic Perspectives
Volume8
Issue number3
Publication statusPublished - 2014

Fingerprint

Workers
Wages
Migrant workers
Firm size
Host country
Managers
Labor supply
Factors
Complementarity
Substitution
Service sector
Wage rate
Malaysia
Manufacturing sector

Keywords

  • Host country
  • Malaysian firms
  • Migrant workers
  • Wage rate

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

The impact of foreign workers on wages : A case study of Malaysian firms. / Ismail, Rahmah; Yussof, Ishak; Awad, Atif.

In: International Journal of Economic Perspectives, Vol. 8, No. 3, 2014, p. 64-75.

Research output: Contribution to journalArticle

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