Malaysia faces AI-driven workforce shift as 697,000 jobs at risk without upskilling, says HR minister

Malaysia could see nearly 700,000 jobs significantly disrupted by artificial intelligence, digitalisation and the green economy within the next five years unless workers rapidly upgrade their skills, Human Resources Minister R. Ramanan has warned.

Speaking in the Dewan Rakyat, Ramanan said a workforce impact study conducted by Talent Corporation Malaysia Berhad found that 697,000 existing jobs are highly vulnerable to technological and economic transformation if employees fail to reskill or upskill.

At the same time, the study identified 120 emerging roles expected to become increasingly important as industries adapt to AI, automation and sustainability-driven business models.

“The findings show that 697,000 jobs are expected to be highly affected by AI, digitalisation and the green economy if workers do not upskill within the next three to five years,” Ramanan told lawmakers.

The minister was responding to concerns raised by Azman Nasrudin regarding rising retrenchments linked to business closures, downsizing and the growing adoption of automation technologies.

The warning comes amid mounting concerns about labour market conditions. According to data from Malaysia’s Social Security Organisation (Socso), 42,807 workers lost their jobs between January and June 12, 2026.

More than 40% of those job losses were attributed to business closures and workforce downsizing, highlighting the pressures facing employers in an uncertain economic environment.

Kuala Lumpur recorded the highest number of retrenchments with 12,844 affected workers, followed by Selangor with 12,360 and Johor with 3,468.

However, Ramanan stressed that labour demand remains strong despite the increase in layoffs. The government's MYFutureJobs portal recorded 605,168 vacancies during the same period, compared with 188,062 active job seekers.

“We believe AI is a catalyst for improving job quality and creating new high-skilled employment opportunities,” he said, adding that the government is pursuing a “proactive and comprehensive approach” to ensure a just transition for workers.

The minister's comments come shortly after new labour market data showed Malaysia's unemployment rate climbed to 3.0% in April, the highest level in six months.

Data released by the Department of Statistics Malaysia showed the number of unemployed persons rose by 0.6% month-on-month to 511,800 in April, up from 509,000 in March. The increase ended five consecutive months of stability at 2.9%.

The rise in unemployment occurred despite continued job creation. Total employment increased by 11,800 positions to 16.82 million, while the labour force expanded by 14,600 people to 17.33 million, creating a larger pool of job seekers than newly created jobs.

Malaysia's labour force participation rate remained at a record-high 70.9% for the fourth consecutive month, suggesting confidence among workers remains relatively strong.

Employment gains continued to be led by the services sector, particularly in wholesale and retail trade, accommodation, food and beverage services, and information and communication activities.

Hiring also expanded across manufacturing, construction, agriculture, and mining and quarrying, indicating that employment growth remains broad-based despite emerging signs of moderation.

Employees accounted for 75% of total employment, with employee numbers rising to 12.61 million. Meanwhile, self-employed and own-account workers increased to 3.15 million.

Yet youth unemployment remains a persistent challenge. The unemployment rate among Malaysians aged 15 to 24 stood at 10.2%, affecting approximately 290,800 young people—more than three times the national average.

To prepare workers for future labour market demands, the government is expanding training and workforce development initiatives focused on high-growth sectors.

Ramanan said more than 26,500 individuals received certification through the Accredited Programme Training System between January and May 2026, while another 2,506 completed industry-led training programmes.

The government is also promoting the MyMahir platform, which provides labour market intelligence, career pathways and skills recommendations aligned with emerging occupations. Its SkillsLab programme includes AI-focused training modules designed to improve employability.

According to the minister, graduates from SkillsLab are expected to secure starting salaries between 5% and 15% higher than average entry-level wages.

In addition, the Skills Development Fund Corporation (PTPK) has allocated RM100 million under a high-impact TVET financing programme targeting seven high-growth sectors, including AI-related fields. The initiative is expected to support 4,167 trainees, with 70 participants already approved for AI-focused training. 

While policymakers continue to describe the labour market as resilient, some forward-looking indicators suggest hiring momentum may be slowing.

Recent research showed reported loss-of-employment cases increased to 7,766 in May from 7,162 in April, well above the 2025 monthly average. At the same time, active job vacancies declined to 107,439 from 112,429 a month earlier.

Economists have cautioned that global economic uncertainty, geopolitical tensions, elevated energy prices and softer external demand could create additional pressure on export-oriented sectors during the second half of the year.

Nevertheless, Malaysia's labour market continues to benefit from resilient domestic demand, ongoing investment activity, tourism-related hiring and government-backed efforts to develop talent in strategic industries such as artificial intelligence, information technology and semiconductors.

The latest figures underscore a growing challenge for policymakers: ensuring workers acquire the skills needed for emerging jobs quickly enough to offset the disruption facing hundreds of thousands of existing roles as AI adoption accelerates across the economy.