aLa Trobe Business School, La Trobe University, Melbourne, Australia, 3086 bSchool of Hospitality,

Tourism & Culinary Arts, Taylor’s University, No.1, Jalan Taylor’s, 47500 Subang Jaya, Selangor, Malaysia
Abstract The key factors that will influence labor and skills shortages occur in the Food and Beverage
industry. Most of the locals in Klang Valley, Malaysia do not willing to join the Food and Beverage
industry is because of low salary, no interest, working hours, education level and etc. The
researched showed that the main factors that influence Malaysian not to join the industry is because
of low pay, shift hour and interest. This paper also offers understanding of the impacts on hiring and not
hiring foreign cheap labor in the Food and Beverage industry. 100 respondents were conducted a survey
and three people were interview (Manager of The Paddington House of Pancake, Director of Sun Hin
Loong Coffee shop, and Petaling Jaya Coffeeshop Association). Keywords: Human Resource
Management, Food and Beverage Industry, Hospitality, Cheap Labor, Labor and Skills Shortages, Service
Quality
_____________________________________________________________________________________
_______ * Corresponding author: E-mail address: fattsiang99@hotmail.com , * Corresponding author.
Tel.: +6-035-629-5000; fax: +6-035-629-5522 E-mail address: SiewHar.Ong@taylors.edu.my

2 1. Introduction ENZ (2009) had identified that human resource issues (skills and labour shortages)
are significantly affected the hospitality industry globally and ranked as the first concern of the top ten
issues, followed by construction cost and technology. Based on the study, labor shortages are already
being felt in the skilled trades, health, automotive, education and transport and distribution sectors.
These issues have become a global challenge in hospitality industry many years ago and even
continue in future if no right plan has taken (HR leader, 2010). Example: Australia will face
thoughtful labor shortages by 2010 and the next 5 years due to the ageing population and this will give a
harder task for the human resource management (HR leader, 2010). In recent years, there has been a
significant increase in the number of refuges worked in Malaysis; International Herald Tribune (IHT)
(2009) stated there were 100,000 refuges working in Malaysia but only around 50,000 is allowed and
Malaysia is one of the main importers of labor in Asian market. Besides, there are nearly 212 million
people in the World unemployed in 2009, an unprecedented increase of 34 million compared to 2007
(Wong cited in International Labor Organization (ILO) News Release, 2010). Hence, this had become one
of the challenging issues in term of economy and social issues in Malaysia. Therefore, area of interest
in this research is to study the key factors that will influence of labor and skills shortages in the
hospitality industry and reason why the industry preferred foreign chap labor. The research is
assisting hospitality industry to have a well planning on recruiting and manage manpower in future. In
addition, the employer and government authorities are able to avoid overloading the country with
foreign labors which may cause social problems in specific areas: reduction of job opportunities for the
locals, safety issues and deterioration of the service quality (Hayes & Ruggless, 2004). Thus, to have a
good planning to recruit manpower, sustain service quality and reduce social issues, it is necessary for
the management and government to answer the following key question: • What is the inherent problem
of labor and skills shortages? • What are the reasons for hiring more foreign cheap labor in the Food &
Beverage industry? • What is the impact of having foreign manpower (cheap labor)? • What are the
effects in terms of service quality standards of hiring foreign labor in the Food & Beverage industry?
The report will address these four key questions in the following three sections of this paper. First it will
present a framework that showed the relationship between labor and skill shortages and the
individual differences, industry context and other factors. Second, review the key factors of labor &
skills shortages and reasons of hiring foreign chap labor. Third, we will study the impacts if the
government allow and not allow the industry to hire cheap labor.

3 2. Literature Review Mulvaney et al. (2006) developed a conceptual framework showed the
relationship between labor and skill shortages and the individual differences, industry context and
other factors. Figure 1: A proposed model of work – the relationship between labor and skill
shortages and the individual differences, industry context and other factors. (Modified from
Mulvaney et al., 2006) According to Mulvaney et al.(2006) cited in Deery and Jago (2009), personal or
individual factor, companies context and other factor were the three major groups of factors that
affected the F&B industry. Hence, the only solution for labor shortages is to recruit foreign
manpower. Thus, there are negative and positive impacts to the country and companies by hiring
foreign cheap labor. 2.1. Factors of labor & skills shortages and reason of hiring foreign manpower
According to Queensland Tourism Industry Council (2007), in the hospitality industry, labor shortage is a
situation where there is insufficient man power or quantitative lack of qualified candidates where
the organization find difficulties to fill the market place and demand for the employment. Skill shortage
can be defined as a very important term where the people with appropriate skills or knowledge for the
job role cannot be fund. Demographic patterns change is one of the main factors that why labor and
skills shortages exist in the hospitality industry especially F&B sector (Davis, 1990). The demographic
where include the age factor: 15 to 24 ages group was the largest percentages of people are not willing
to work in a restaurant or hospitality line due to the low pay, shift hour and others reasons. Besides,
Tanke (2001) stated that teenagers not willing to work in Food and Beverage industry because there
is other companies that offer more shorter or reasonable working hour than the Food and Beverage
Industry. Based on study, the hotel industry especially food service, 63.4 % of the work force is
between ages of 15 to 64 year old. In fact, there are older people who are willing to work in the
restaurants. But the issue is the Human Resource of Individual Differences Other Factors -
Demographic Characteristic - Spouse - Personality - Local Perception - High Education Level -
Baby Boomer - Economic Background - Turnover rate - Others Labor and Skills Shortages
Hiring Foreign Labor Government Not Allow Government Allow Positive and Negative Impacts Industry
Context - Long @ irregular hours (Shift hour) - Low pay - Norm of relocate - Work Rules (benefit)

4 the restaurants is not willing to accept them due to the demographic reasons (Barrows and Powers,
2009). Based on Healey (2000), the entry of women will help ease the problem of labor shortage. Tanke
(2001) also mentioned the same issue that Healey mentioned in year 2000. Nowadays, there are a big
proportion of women in the work force in the hospitality or Food and Beverage industry. It means that
there are more female workers will fill into the positions in hospitality industry compared to last time
which was traditionally held by the male (Tanke, 2001). According to Bureau of Labor Statistics (2000,
cited in Tanke, 2001), the labor force contribution rates is increasing in hospitality industry in all the
age groups and they projected men’s labor force contribution rates for all age groups from 45
years old was actually declining. This means that the hospitality industry will continue hiring more
female workers to fill in the vacancies because they are well suited to such positions as front line like
restaurant service staff and housekeeping departments. Other than that, personality or characteristic
of a person have a greater impact on labor and skills shortages also. A person with the lazy attitude and
not willing to accept and learn new things from others, he or she might have shortage of knowledge and
specific skills to fulfils certain task. So, skills shortages might exist (Devine, Baum, Hearns and Devine,
2007). A very common situation in Malaysia is most of the educated young people prefer white-collar
jobs in the hospitality industry due to the working environment, shift hour and low pay. According to
Central International Agency (2009), there are approximately 30millions people who prefer white
collar jobs rather than the hospitality industry. Johanson (2006) said that for last 10 years,
experience alone was considered as sufficient, a qualified certificate in Hospitality program was not
important in the food industry as experience. Now an education level such as undergraduate or post
graduate is important to a person who wants to join the industry. The sad news is most of the student
who graduated from the hospitality program do not want to join the hospitality industry and only want
to receive the name of ‘undergraduate’ or ‘postgraduate’. In addition, economic background will also
determine someone to join the industry. According to Devine et al (2007), a person with good
economic family background, there is a high percentage of he or she will not join hospitality industry. On
the other hand, a person with poor economic background, their willingness to join Food and
Beverage industry is high because of free accommodation and food. Labor and skills shortages occur in
the F&B and hospitality industry is because of the effect of baby boomer. According to an article with
the title of ‘Demographic change’ wrote by Davis (1990), there is a huge change in age patterns when
baby boomer grows up and this reflects the working society today. Teoh (2010, cited in Index Mundi,
2009) mentioned that all the baby boomer in Malaysia will retire soon at the age of 55 with Malaysian
law. This will lead to further shortage of labor in the food and beverage and also hospitality industry
because most of the young adults or teenagers are not willing to work in the industry and most of them
are lack of specific skills and knowledge or experience. Locals think that work in the Food and Beverage
industry is a low significant job. Tan (2010) stated that the locals in Klang Valley or even the whole
Malaysia feel that service staffs are low dignified jobs. From conversations, researcher noted that to
hire a foreign manpower the monthly pay is around RM 1000 but for the locals they will ask for RM
2000. For the working hour, a foreign worker works 10 to 12 hours per day but for local only 8 hours
and additional time is considered as over time. A surveyed of 503 undergraduate students from
Hospitality and Tourism Management program at four different Universities in China. The main objective
of the survey was to examine different types of career goals and expectation of people who take
Hospitality and Tourism management program (Lu and Aldle, 2009). The results showed that majority
of the undergraduate students were interested and there are quite a number of them will be
pursuing a career in the hospitality and tourism industry and more to management department
but not Food and Beverage sector. According to the survey, the main reason not wanting to enter the
industry is because of ‘no interest’. Moreover, opportunities for personal development and high salaries
were found to be the most important goals for them to pursue (Lu & Aldle, 2009). Benjamin (2010)
reported that there was a career fairs to recruit locals to work in restaurants in Johor Baru,
Malaysia. It has been reported that 45,000 vacancies in over 3,000 nasi kandar and Indian restaurants
are open only to Malaysian, but there were only 90 enquiries. This clearly showed that Malaysians are
not willing to join the Food and Beverage industry. Lee (2008 cited in Wham, 2008) stated that hiring
foreign labor can provide round clock service or

5 extend their business and without having to pay overtime. Because of that, they can actually run
their business for longer hour in order to compete with other restaurants. Wham (2008) also
mentioned that by hiring foreign labor, the coffee shops and restaurants can easily extend their
business operating hour and these would strengthen their competitiveness within their vicinity.
Other than that, spouse is one of the important factors that cause labor shortage. According to
Mulvaney et al (2006), a supportive spouse or an unsupportive spouse will determine their partner’s
decision. A husband is willing to join the industry or food and beverage industry but his wife is not
supportive. This will discouraging him and vice versa. The demand for higher position and also higher
salary is a reason why labor shortage occurs and they prefer hire foreign labor is because of the low pay
salary and willing to work compare to local (Associated Press, 2007). Further, the hiring of foreign
manpower is not a new issue nowadays and those who are not recruiting foreign manpower are not
realistic (Choi, Woods and Murrmaan, 2000). According to Choi, Woods, and Murrmaan (2000), there
are a large number of immigrant labors in Malaysia who are believed to have deprived the opportunities
the locals because most of the employers opt to recruit cheaper workers. Further research about the
problem, Susanto, et al (2010) stated that US is also facing the same problem where the locals request
for higher paid in the service industry. Therefore the employers will also look for more foreigners who
only request for low pay. According to their Immigration policy (2010, cited in Susanto, et al, 2010), they
have changed their foreign policy which gives first priority to the locals. But still there are companies
hiring foreigner in illegal ways. Tanke (2001) mentioned that the demands for unskilled and semi-
skilled positions were increasing due to the turnover rate in hospitality industry. People work in this
industry have to accept the poor working condition, long working hour, low pay compare to other
industries, etc. and finally this will become the major answer to solving the staffing need of the future
curbing the turnover rate. To further research, based on the Northern Ireland (NI) Skills Monitoring
Survey (2002 cited in Devine et.al.,2007), across all the industry sectors, employee turnover was higher
in the hotel and restaurant or Food and Beverage sectors at 36 percent and also higher level of
vacancies at 19 percent or 3,225 unfilled vacancies. Abdul Manap (2008) which is Home Affairs Ministry
secretary-general of Malaysia said that a ten- years ‘staying permit’ for those foreign workers with
specific skill and a 5-years permit for unskilled workers (msnbc, 2008) can actually encourage them to
learn more skills. According to Lenton (2009), a worker has to go through a training process in order to
provide a service of good quality. To further support Lenton(2009) statement which is Baum (2006)
mentioned that in order to improve worker skills in the way to improve the services, a training is a
must and is very important to a business. Other than that, Dessler (2000) have also written that
training will give news present employees the skills that they require to fulfil or to perform their duty
well. Besides, in order to make the service quality stay competitive, all the staffs have to have full
product knowledge where this can improve by undergoing training. Last but not least, training can also
improve their communication skill with guests. According to Dessler (2001), the increasing competition
had put a premium on better services. Employers should provide certain effective equipment to help
during the process of training. According to research, spoken skills should be emphasized during adult
education so that the worker will be able to communicate with customers well and enhance quality of
service. 2.2. Government Allow Hiring Foreign Manpower Based on researched, there are positive and
negative impacts if Malaysia government allow the industry to hiring foreign cheap labor to overcome
the labor and skills shortages issues. The following two section will identified what are the impacts.

6 2.2.1. Positive Impact There is no doubt that Malaysian government is unabashed with its liberal
recruitment policies for foreign workers. According to Lee (2008 cited in Wham, 2008) there are 3 main
reasons or benefit to hire foreign workers. First are the coffee shops and cafés. By hiring them, they can
open early and close late or even provide 24 hour round clock service because the foreign workers are
hardworking and willing to work long hours compared to the locals. Second, with the help of foreign
workers, airports, seaports, factories, and offices and of course hospitality industry like hotel, restaurant
and retail outlet can offer better service and longer business hours. Third, Lee (2008, cited in
Wham, 2008) also mentioned that a lot of restaurants do not generate better profit because of the
economic slowdown. By hiring foreign workers, they can reduce their high labor costs; otherwise, they
may have to go out of the Food and Beverage industry or their business. According to Barrow (2000),
training is a must for foreign labors because most of them are not educated and this would actually
help to improve a flow of a business operation when after undergo training and even a local or
experience staffs have to undergo training after some times. According to Galagan (2010), turnover rate
will be lower for foreign labor compared to locals. Basically, foreign manpower in Malaysia have a 2
years contract with their employers but local did not and of course most of the locals would not work for
the restaurant for long period due to the mentioned factors. In this case, a foreign labor who already
undergoes a training that provided to them will at least work for 2 years. Thus, a restaurant or café can
save cost in providing extra training and also solve the labor and skills shortages issue. 2.2.2. Negative
Impact The main impact which would occur is that there would be more hassles caused because of
the language barrier where the new foreign staff may have a problem to communicate among the staffs
and also customers. According to Tan (2010), it was a major problem that they face in Food and
Beverage industry in whole Malaysia. A lot of miscommunication among staff occurs and this would
disrupt the daily work flow. Besides, guest satisfaction will be affected by hiring more foreign workers
because of the slowdown delivery service and found difficult to communicate with foreign labor. Further
research, by hiring foreign manpower where most of them are of low education, the service quality may
be affected (Mill, 2007). According to a study done by National Restaurant Association (2005, cited in
Mill, 2007), there is 70% satisfaction in communication skill which is considered an excellent percentage
in providing timing service. According to Hayes and Ruggless (2004), the problem of food service
operators with undocumented foreign workers in the U.S. Challenges are facing the same problem of
screening alien applicants who are qualified to work in the country. The result is it would affects the
government’s efforts to reduce the number of illegal foreigner working in the industry (Hayer &
Ruggless, 2004) and also same in Malaysia. Based on research, the number of foreign workers keeps on
increasing, social problem may occur. According to Tan (2010), the association had received
more than 100 complaints from Resident Association, Petaling Jaya which is all about the activity of the
foreign labor who works in restaurant or coffee shop was affecting the safety of the residents living in
the area in last year. 2.3. Government not allow Hire Foreign Workers Tan (2010) believed that a lot of
small businesses in Klang Valley will have to close down if foreign cheap labor are not allow for hiring by
the government. Besides, if an outlet without hiring foreign labor, the labor cost will go higher and they
might not hire too many working staff and because of that the service quality may goes down. As
mentioned, the turnover rate of staff will still be very high due to the unwillingness of local to
work in the service industry (Galagan, 2010). In this case, the problem of labor and skills shortages
cannot be solved id without foreign labors. Due to the shortages and also lack of staffs, the operation
will not be able to perform well and could not deliver the best service for their guests and this will
totally affect their business no matter in the short or long run. According to Collins (2009), if without
foreign labor all operators will have to face this problem caused by the shortage. The social problem will
increase by hiring foreign labors but with certain training and educate them; the social problems sure
will not increase because of them.

7 In Addition, the higher the number of foreign labors (cheap labor) who come from countries with
low education level or third worlds will actually affect the security or the environment of that
country; it would also affect the economy due to the high outflow of money. According to the 2001
Malaysia census, there were 1.38 million foreign born in the country and half of them from Indonesia
which means the number of foreign people in Malaysia was increasing (Graeme, 2007). In conclusion,
Malaysia without foreign labors, will impact greatly the hospitality industry while foreign labor will also
bring huge negative impact to the country – economically and socially, so hiring of foreign labor has
both positive and negative aspects. 3. Methodology ‘Quantitative techniques consists of defining a
problem, developing a model, acquiring input of data, developing a solution, analyzing the result, and
implementing the result’ (Render, Stair and Hanna, 2003) This research is conducting a
qualitative and also quantitative methodology but mainly using the quantitative approach. The
quantitative data collection techniques like conducting a survey are used to gather information in
general. By having a qualitative data collection like interview is to further support the information
collected from the survey. For quantitative research which is focusing on the paradigm of interpretive
research where there are without hypothesis testing. For more distinctively and primary information
acquired through a survey questionnaire. The issues of labor and skills shortages and why Food and
Beverage industry like to hire foreign labor (cheap labor) can be measured quantitatively and also
qualitatively. Quantitative measures of the factors cause shortages of manpower and skills and also
whether government should or should not agree the government to allow foreign labor in the Food and
Beverage industry. Whereas, qualitative measure of why Food and Beverage industry likes to hire
foreign manpower (cheap labor) compare to locals and also the issue of hiring foreign labor. Due to
this reason, this research adopts a mix of qualitative and quantitative approaches in discussing and
analyzing the issues on shortages of labor and skills and hiring foreign cheap labor. 3.1. Research Design
A nature of qualitative design in this report would like to seek further information or knowledge on the
research question (survey questionnaire) and hence the usage of interview with 3 Restaurants in Klang
Valley will be the main approach for this report where the researcher can take the information as a
measurement and supporting information. Besides that, the researcher will also conduct 100 set of
surveys with students in University who are pursuing hospitality course and randomly choose in
Petaling Jaya which is a quantitative method and most of the respondents are from the hospitality
school in Petaliing Jaya. 3.2. Source of Data The Researcher uses a variety of primary data, sourced
from books, professional journals, other published articles, personal communication, and also from
various websites and electronic database to carry out this research. 3.3. Primary Data Questionnaire is
a comment tool in research, which is used to gain in-depth overall perspective of the research; and in
this context, to achieve an overview of what are the issue of labor and skills shortages in Food and
Beverage industry and also the reasons and the impact of hiring foreign cheap labor. Besides, ordinal
scales are used to solicit information from respondents. The survey was conducted from September
2010 to October 2010 and the results are evaluated based on the theoretical framework of Mulvaney
et al (2006). The survey questionnaire will be distributed to restaurants,

8 coffee shops and as well as hotels in Klang Valley and this survey took about a month. Besides that, a
one to one interview will be conducted to support the survey data. Three interviews are with a
restaurant (The Paddington House of Pancake), a popular mamak café in Petaling Jaya (Murni) and also
Restaurant Sun Hin Loong which owned by the President of Petaling Jaya Coffee Shop and Restaurant
Association. The interview will cover the impact of labor and skills shortages, the reasons why they
normally hire foreign labor and not local; will they affect the quality of service and also bring about
social problems. In addition, the solution or recommendations on labor and skills shortage will be looked
into by the researcher. 3.3.1. Secondary Data In this research, surveys done by the Petaling Jaya Coffee
Shop and Restaurant Association (PJCA) will be used to further explain and understand the data and
information collected. Besides that, the journals and literatures provided as references in this research
will give further support and analysis. 3.3.2. Respondents The sample size of this research is 100 out of
which three people will be interviewed. 70 respondents were from final year students in KDU in
hospitality program and 30 were distributed to customers who are having their lunch in Klang Valley.
This is because the researcher wants to know how the standard of quality provided by the foreign
workers. 4. Conclusion Based on the findings, majority of the respondents and all the interviewees also
agreed with locals and young adults do not want to work in F&B industry. Thus, from the research, we
can argue that foreign cheap labor were important to the industry and public. As from the researched
and findings: interests, salary, demographic, working condition, shift hour, company policy, economic
background, education level and also family influences will definitely determining the one to join or not
to join the industry. The most importance factors that influence locals not to join the Food and
Beverage industry were because of the low salary and shift hour. The least importance factor was family
reason. Besides, the survey data shows that out of 100 respondents, 44 respondents willing to join the
Food and Beverage industry or joining before. The survey shows that quite a number of respondent
willing to join or joining the industry before. It means that the trend was change now compared to last
few years where not much people will actually opt for the industry. The main reason they joined the
industry was because of their interest; and the least importance factor that will influence them to join
the industry was family reason also. Apart from that, almost all the respondents and all the
interviewees included PJCA think that the government should allow the Food and Beverage industry to
hire foreign cheap labors. Foreign labors enable to learn certain skills in a very short period such as
communication skill and also service skill. As a conclusion, labor and skill shortages is a global issue and
it is concern for the majority of the service industry. If local labor workforce higher participation in
the service or food industry, it will decrease the labor and skill shortages that the hospitality industry are
facing now. And also the government should apprehension about these problems. 4.1.
Recommendation Based on the results collected by the researcher, the major factor to influence
respondents not to join the industry is because of the salary. Hence, there are some of the
recommendation for the Food and Beverage and also the government. First, the F&B industry
should set a comprehensive pay system in order to attract more locals to work in the industry. A fair and
reasonable pay system is needed for purpose of encouraging locals and also employees to join in;
perform and achieve the organization goals. It would be a benefit if the industry do hires more local
workers. This is

9 because local workers would have the skill to handle the task which needs to be carried out in the
restaurant compared to the foreign; such locals would be those whom have experience in the
food service industry and also college graduates. Besides, the industry should provide employees
fringe benefits. The purpose of offering more benefits such as higher basic so that they can get a higher
Employer Provision Funds (EPF). This is to encourage locals to join in the Food and beverage industry.
Hence, the problems of lack of manpower and skills can be solving. Apart from that, shift hour was
one of the major factors to influence them. In order to attract more locals, the industry could try to
give flexible working schedule to the staffs so they can arrange their time. Therefore, they will not feel
like a burden to work for a long period time. Besides that, locals could get extra leaves where they can
replace the public holiday leave if they are required to work during the public holidays. The company
can also entrust them with annual leave during the end of the year. In addition, local staff could have
the benefit of getting special employee discount rate when they dine in or buy meals from
Paddington House of Pancake as they can have the meals in a favourable price (Beardwell & Holden,
2001). Mill (2007) written that motivating employees is to enrich jobs such that they providing
the interesting and meaningful work to the employees. Motivation such as recognition to the
employees when they have to achieve something is very important because it will let them feel they
are belonging to the company. Company should also introduce the individual incentive program and
group programs as a motivation to the employees. According to Dessler (2000), employees who meet
certain lever or standard in specific individual performance can be award with incentive such as “The
Best Customer Server in The Month”. This activity will motivate employees or staff to perform their duty
as well as being more commitment to the employer. Based on the interview, they do not provide
continues training to their staffs. The researcher suggests that organization should provide
advancement for the higher education to develop more skilled employees. This will help the company
to attract more new graduates to join the organization. Employees who have lower educational
certificate and low skills, the organization should provide training courses continually to improve their
abilities to work. Last but not least, the government should also put more effort to work hand in hand
with the industry to solve this problem. The government should review the labor law and allow the
industry to hire foreign labor but with certain rules and regulations. For example, a restaurant can
only hire 1 foreign when there are 3 locals which similar. References Barron, P. (2008). Education and
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