Impact of Foreign Maids on Female Labor Force Participation in Malaysia

Abstract

Demand for foreign maids by households in Malaysia has increased rapidly and expected to affect female labor force participation. Simple comparisons of households with maids and those without suggest that maids raise the participation rate of their female employers by 26 percentage points. However, such comparisons are not directly comparable. Households employing maids differ in many ways from those that do not. When propensity score matching methods are used to estimate the treatment effect of having a foreign maid, the female labor force participation rate is estimated to be only 18 percentage points higher in 1993/1994 and 13 percentage points higher in 2004/2005. This decline over time in the treatment effect is not apparent when simpler but potentially biased methods are used. The small and declining impact of hiring maids suggests financial losses to the host households.