Young and jobless

PETALING JAYA: The youth unemployment rate in Malaysia has reached more than three times the national unemployment rate of 3.1%, due to the slower growth in hiring, according to Bank Negara in its 2016 annual report.

In 2015, the unemployment rate among youths was estimated to have reached 10.7%.

Bank Negara said youths represented more than half of unemployed workers, although it only made up a third of the labour force.

“In 2015, unemployment rate among youths increased by 1.2 percentage points from an estimated 9.5% to 10.7%, while national unemployment rate went up by only 0.2 percentage points (from 2.9% to 3.1%) during the same period (see chart).

“Cautious business sentiments and moderating economic performance have restrained businesses from expanding their workforce,” noted Bank Negara.

The central bank stressed that while youths were the most vulnerable to these trends, they were perhaps the last to be hired and first to be made redundant due to a lack of experience, higher information asymmetry on the labour market and poor communication skills.

“Slower hiring has had a wider impact on the economy, affecting particularly youth and new jobseekers,” it added.

In terms of employability, the central bank said that youths with tertiary education were the highest among the unemployed at 15.3%.

About 16% of those aged 15 to 24 years have tertiary education.

The highest level of schooling attained by the remaining 84% was secondary education, said the central bank. Among regional economies, Malaysia’s youth unemployment were in the double-digits, despite an overall low unemployment rate.

But interestingly, this trend does not appear to be unique to Malaysia.

“Among regional economies, unemployment rates for young graduates also tend to be higher than non-graduates.

“This observation appears to be counter intuitive to the economic wisdom of increasing returns to educational attainment and seems to be the opposite of the experience in advanced economies,” it said.

These trends were likely to be related to the nature of global supply chains and ensuing patterns of job creation in the emerging economies.

Thus far, research on factors driving comparative trends on graduate versus non-graduate youth unemployment in advanced and emerging economies have been scant.

These developments in graduate unemployment have raised several key policy questions for emerging economies, with regards to enhancing the quality and relevance of education systems to prepare for rapidly evolving industries, the types of jobs being created and the readiness of the human capital base, apart from measures to enhance matching in the labour market, among others.