Malaysia's informal sector made up 8.3% of employment in the labour market for 2019, a 1.3% drop from the share of total employment in 2017. 

In its Informal Sector Workforce Survey Report 2019published on Thursday (23 July), the Department of Statistics (DOSM) noted that overall the sector employed 1.26mn people in 2019. 

Between 2010 to 2015, the sector saw an increasing trend, employing 450,000 more people - from 953,100 in 2010, to 1.4mn in 2015. However, compared with 2019, the sector saw a declining trend, employing 146,900 fewer people in 2019 than in 2015.

priya july 2020 dosm chart 1 employment share

More women, but fewer men employed in the sector in 2019

The number of men employed in the informal sector in 2019 stood at 707,200, making up a total of 56.3%, a decline from 61.3% recorded in 2017 (850,400). While this was so, an increase in women employed in the sector was observed, up from 536,000 in 2017 (38.7%) to 548,900 in 2019 (43.7%).

As a result, the annual growth of employment in the informal sector for men recorded a 9.2% decline from 2017 to 2019, while a positive annual growth of 1.2% was noted for women in the same period.

priya july 2020 dosm chart employment by gender

Own account workers made up largest share in employment

When broken down by employment status in the working class, namely employer, employee, own account worker, and unpaid family worker, the largest contributor in 2019 was own account workers (71.7%).

This was followed by the employees at a much lower percentage (17.1%), unpaid family workers (8.9%), and finally, the employer (2.2%); Further, the categories of own account workers and unpaid family workers saw an increasing trend in employment in 2019, when compared with figures from 2017 (69.4% and 8.1% respectively).

priya july 2020 dosm chart employment by status

Defining the informal sector

According to the DOSM, referring to the International Labor Organization, the informal sector is designed as a subset of households unincorporated enterprises where the detailed definitions for the informal sector are as follows:

  • "The informal sector may be broadly characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned. These units typically operate at a low level of organisation, with little or no division between labour and capital as factors of production and on a small scale."

  • Production units of the informal sector have the characteristic features of household enterprises. The fixed and other assets used do not belong to the production units as such but to their owners. The units as such cannot engage in transactions or enter into contracts with other units, nor incur liabilities, on their own behalf.
    The owners have to raise the necessary finance at their own risk and are personally liable, without limit, for any debts or obligations incurred in the production process. Expenditure for production is often indistinguishable from household expenditure. Similarly, capital goods such as buildings or vehicles may be used indistinguishably for business and household purposes.

Lead image / 123RF

Infographics / Department of Statistics Malaysia