Some years ago, the issues of foreign workers is often arise in magazines, newspapers and in mass media. This is because Malaysia overwhelmingly requires foreign workers to increase productivity of the country’s economy for the sectors involved. According to economic reports released by the Ministry of Finance, the percentage of registered foreign workers is between 16% and 38%. Hence, it is undeniable that foreign workers are a major contributor to the national economy.
In this situation, local workers had to face challenges in terms of salary scale caused by foreign hiring practices that emphasized low salary schemes. These foreign workers will not only be competing with local for the same jobs but they could be a liability if their presence and entry are not controlled. This exposure was given after looks the problem difficulty to recruit the local as they are not attracted to low salary scale and working conditions introduced by the employer on certain sector. Lansbury (2009) seen that globalization has exerted pressures on job security in a number of countries.
Furthermore, main purpose foreign worker is to gain sufficient income in short period of time. They are more devoted to their job, when they are given additional work, because of their urge towards the job and the wages; an exact opposite of the local workers, who normally give reasons to avoid from working extra time and decide things last minute. Also, help ease the tight labour condition especially in the manufacturing sector and to improve labor productivity. Currently, study by Kangesniemi et al. (2007) finds that foreign workers are more productive than domestic in the United Kingdom.
Besides, government commenced to encourage the employment of foreign worker to solve problem of labour shortage. The growing presence of foreign workers in Malaysia can be explained by excess demand for labour associated with rapid economic growth, as well as the relatively cheaper cost of foreign labour.
In other hence, to decrease the dependency on foreign workers, we are suggested that the problem should be tackled from the root especially to face the presence and entry of illegal workers. The policies such as the minimum wage will not encourage employers from hiring foreigners, as there will be no wage differences between local and foreign workers. Studies by Meier (2004) and Ashimada (2004) have come up with the same recommendations.
The government has instituted various policies to control the employment of foreign worker and to control the entry illegal foreign workers. This is to reducing the number of foreign workers by increasing the levies and to reduce the dependency of Malaysian employers on foreign workers was put to a stop by the outsourcing corporation whereby their main income comes from recruitment of foreign workers. Besides that, many Memorandum of Understanding have been signed with labor exporting countries like Indonesia, Bangladesh, India and Nepal to authorize legal recruitment of foreign workers. The causes of this phenomenon have incurred stress on public amenities and services, such as health and education facilities.
Additionally, it is also important to research the relationship between domestic labor and foreign labor; whether substitute or complement. A study by Dupuy and DeGrip (2003) estimates the elasticity of substitution between labour in Denmark. They divide the workers by their educational level and occupation skills. They also stated skilled workers with all other labour inputs and capital had a higher elasticity of substitution in larger firms than smaller firms. Besides, the elasticity of substitution between skilled and unskilled workers was also larger in the large firms.
Finally, our approximate results indicate increasing the domestic labour, foreign labour and material will yield positive influence on the labour productivity of the manufacturing industries. But, the capital labour ratio tends to show negative relationship on the labour productivity. Hiring foreign workers have enhance the economic growth rate of our country but it also lead to our country become unsecure and criminal occurred frequently.