# **3.2. Demographic Change and Employment Growth**

Both changes in the aggregate employment rate and changes in the share of the working age population among the entire population are fundamental components of output per capita. To contribute to an understanding how these components have impacted economic growth in Malaysia from 1987 to 2018, this subsection presents an overview of how basic demographic and employment conditions have changed from decade to decade. In addition, the section paints a detailed picture of employment levels and growth both in the aggregate and across sectors as key building blocks to structural transformation and economic growth.

Between 1978 and 2018, Malaysia’s overall population almost doubled, increasing by about 93.1 percent (see Table 5). In parallel, due to a “demographic dividend” (Bloom et al. 2003) brought about by falling birth rates and the late onset of an aging process, the share of the country’s working age population – defined as those between the ages of 15 and 64 – among the overall population increased by almost 12 percentage points, from 58.4 percent in 1987 to 69.7 percent in 2018 (see Figure 4). It should be noted that the annual growth rate in the working age population decreased over time, from about 3 percent in 1987 to 1.3 percent in 2018 (see Figure 5). In fact, with much of the demographic dividend exhausted and aging gaining pace, the share of the working age population among the overall population is projected to soon start to decline.

**Table 5: Demographics and employment**

||**1987**|**1997**|**2007**|**2018**|
|---|---|---|---|---|
|Total population ('000)|16,774|21,769|27,058|32,382|
|Working age population (15-64 years) ('000)|9,795|13,267|17,839|22,570|
|Share of working age population (%)|58.4|60.9|65.9|69.7|
|Employment as a share of working age population (%)|61.1|64.6|59.1|65.5|

Source: Authors’ calculations based on data from DOSM

**Figure 4: Share of working age population among overall population, 1987-2018**

**Figure 5: Annual growth in working age population (%), 1987-2018**

<!-- Start of picture text --> 70 4.0<br>3.5<br>68<br>3.0<br>66<br>2.5<br>64 2.0<br>1.5<br>62<br>1.0<br>60<br>0.5<br>58 0.0<br>-0.5<br>Source: Authors’ calculations based on data from DOSM Source: Authors’ calculations based on data from DOSM<br>Share of working age population (%)<br>Growth in working age population (%)<br>988<br>1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 1 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018<br><!-- End of picture text --> The share of the working age population that is in employment – subsequently referred to as the employment rate – also increased between 1987 and 2018.<sup>5</sup> However, this overall trend hides a more complicated pattern with an increase in the employment rate between 1987 and 1996, a subsequent period of decline between 1996 5 The standard definition of the employment rate refers to employment as a share of the labor force, where the labor force includes those who are employed and unemployed within the working age population, and excludes those who are not actively looking for jobs.

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