The Impact of Foreign Labour on the Unskilled Labour Demand in Malaysia

The main objective of this study is more on the unskilled labour input where the unskilled labour market is going to build across the Malaysian major sectors. It is evident that Malaysia has a large foreign labour market because of excess demand for labour, easily filled by foreign workers. For empirical investigation, this study uses a panel data analysis that consists of 12 years data of agriculture, manufacturing, and services sectors. The result of the Pedroni cointegration test shows that there are four out of seven panel statistics suggest the unskilled labor demand model is integrated within sectors. By using Fully Modified OLS (FMOLS), the finding demonstrates that only agriculture has long run- positive relationship with unskilled labor employment since this sector creates highest unskilled labor demand to fulfil the current production capacity and force this sector to hire also foreign labour. DOI: 10.5901/mjss.2016.v7n1p264