WITH the rise of Industry 4.0, the hunger for innovation and the constant battle between firms to become industry leaders have intensified.
Younger generations appear to be the perfect representation of the changing landscape of our society and corporate world.
Otherwise known as “Millennials”, they have grown up being accustomed to gadgets and other technological changes, and therefore have the ability to quickly adapt in an environment where rapid technological advancements are a norm now.
As a result, one would expect companies to welcome the new generation into the workforce with open arms. In reality, this does not seem to be the case in certain countries, including Malaysia.
Youth unemployment The average youth unemployment rate across Asean is around 10.6%. According to International Labour Organisation (ILO), countries with the highest rates include Brunei (28.9% in 2017), Laos (18.2% in 2017) and Indonesia (15.6% in 2017), while countries such as Cambodia, Thailand and Myanmar reported the lowest rates of 1.1% in 2016,4% in 2018 and 4% in 2017 respectively.
Over the past 10 years, the youth unemployment rate in Malaysia has remained steady, averaging 10.4% and peaking at 11.9% in 2009 before falling to 9.7% in 2011. In 2018, it reached a rate of 10.9%, which is higher than the 2010-2017 average of 10.4%.
The youth unemployment rate has followed a similar trend to the national unemployment rate; although the figures differ substantially. While the unemployment rate in the last decade has ranged between 2.9% and 3.7%, the youth unemployment rate never dropped below 9.7%.
Meanwhile, the proportion of youths that make up the total unemployment is around 60%, with 40.5% of total unemployment comprising unemployed graduates, signalling the presence of an evident disparity. This raises the question of whether such levels of youth unemployment are acceptable within a developing nation such as Malaysia, which aims to achieve a high-income nation status by 2023.
Nowadays, the advancement of artificial intelligence has automated many different types of jobs. Thus, it is no surprise that the most demanded high-skilled jobs in Malaysia, as well as in a large portion of the world, are related to computer science and technology.
In fact, TalentCorp lists systems analysts, software developers and applications programmers as highly demanded skilled occupations in its 2018/2019 Critical Occupations List (COL). This compilation comprises numerous job titles grouped by occupation, including managers, engineers and computer scientists.
Unsurprisingly, these are the main high-skilled professions that are currently sought-after in Malaysia, particularly within the manufacturing sector in 2018, which accounted for 57% of total job vacancies. The services sector came in second place at 18.9% of total job vacancies.
The COL gives a breakdown of each occupation, outlining the skills that are required to fill each position and the main reasons for the vacancies observed. The three recurring reasons contained throughout the report include: lack of required technical skills, lack of relevant job experience and shortage of applicants.
Applicants not having the relevant and necessary technical skills are strongly correlated with their academic pursuits. Almost all jobs listed on the COL require a minimum of bachelor’s degree, with many demanding additional certifications or qualifications. In 2018, around 96% of total graduates obtained either a diploma or first degree, with only a remaining 4% receiving a Master’s Degree, Ph.D., Post Graduate Diploma or Advanced Diploma.
According to the World Bank, the number of graduates from tertiary education as a percentage of the total tertiary education age population is around 11% in Malaysia, compared to 24% in Canada, 17% in the US and 16% in Japan.
These figures indicate that Malaysia still has some catching up to do in terms of incentivising young people to pursue higher education, as well as encouraging more graduates to obtain advanced qualifications.
With regard to experience, almost all employers prioritise workers who have been in the workforce for a longer period, with an average of around five or more years of work experience. For example, respondents of the TalentCorp Call-for-Evidence survey in the field of chemistry, opted to hire experienced candidates rather than fresh graduates.
Additionally, an airline company also stated that there is a dire need for experienced pilots.
This makes it extremely difficult for fresh graduates and young professionals to even be considered for employment by companies in the first place.
Although nominal wages in Malaysia have been on the rise albeit at a slow pace, real starting monthly salaries (inflation-adjusted) for fresh graduates have declined since 2010.
As stated in Bank Negara’s Annual Report for 2018, a fresh graduate with a diploma earned an average salary of RM1,376 in 2018, compared with RM1,458 in 2010.
Based on Department of Statistics Malaysia, the total vacancies in skilled jobs in 2018 yields an estimate of around 47,000 total jobs, which is significantly lower than the number of unemployed graduates with tertiary education of 178,400. As a result, firms need not raise fresh graduates’ salary due to the over-supply of fresh graduates in the labour market.
It is also alarming to see that low-skilled jobs continue to account for the largest portion of job vacancies. In 2018, around 78% of total job vacancies were for elementary positions with only 0.4% for scientific and technical roles, and 1.3% for financial and insurance jobs respectively.
The above findings justify the presence of high levels of youth unemployment, although they may seem contradictory to the feedback reported in the COL regarding shortage of applicants; thus raising the issue of underemployment.
In fact, a study by Khazanah Research Institute found that 50% of young workers in low-skilled manual jobs are over-qualified for these occupations. Therefore, many young, educated people have to resort to jobs that do not utilise their expertise.
In addition, some of these young people who are fresh graduates tend to seek lower-skilled jobs because they pay more than high-skilled jobs. For example, a Grab driver working for 40 hours per week, is estimated to earn around RM3,156 per month. This calculation uses the revenue calculator provided by Grab.
Do not be discouraged by current state of youth unemployment
Industry 4WRD, Malaysia’s national policy on Industry 4.0, is set to bring about major changes to the manufacturing industry which will require an upskilling of workers and creating an overall increase in the demand for high-skilled workers.
In particular, one of the four specific goals of the policy is to increase the number of high-skilled workers in the manufacturing sector from 18% to 35% by 2025.
At the budget 2019 speech by Lim Guan Eng, Minister of Finance, the government expenditure allocated for education was detailed in Strategy 8: Education for a Better Future.
In this section, several measures were outlined regarding students in tertiary education.
A total of RM206mil will go towards the development and provision of training programmes in Polytechnics and Community Colleges.
Additionally, RM30mil will be allocated to introducing a Technical and Vocational Education and Training (TVET) Contestable Fund to encourage public training institutions to run competitive programs with assured job placements for graduates, as well as RM20mil to raise youth competencies via TVET Bootcamps.
Also, RM400mil will be distributed to public universities for research activities and to promote collaborations between these institutions and international agencies in strategic areas, via the Malaysian Partnerships and Alliances in Research (MyPAIR) program.
Fresh graduates currently find themselves in a situation where they are under-qualified and inexperienced for many high-skilled jobs, but are overqualified for the remaining available jobs.
Although funding by the government will contribute towards reducing youth unemployment levels, the challenge now is for educators and employers to synergise for a smooth transition between the education stage and work stage of life. This can be done by adjusting the curricula, providing more internship opportunities for students to gain exposure and industrial experience.
To tackle unemployment among graduates, we are keen to see the government step in with long term investment in education. This is to revamp the tertiary education system in line with job creations in skill-intensive sectors.
As such, a 3+1 (3 years University+1 year in Industrial training) approach could be ratified in Malaysia’s higher education system to minimise the mismatch between graduates and what the labour force needs. Thorough discussions should take place on the way forward to bridge this gap.
To empower students with the necessary skills during the job training phase, the government should consider giving incentives to the hiring firms in terms of tax reduction. This is in the hope of encouraging more companies, especially the Small and Medium Enterprises (SMEs) since they make up around 98% of total firms in Malaysia.
Malaysian firms could significantly reduce the unemployment among graduates through industrial training programmes coupled with a promise of employment at the end of their tertiary studies; at the same time having a tax reduction benefit for their company. As such, these schemes offers a win-win situation for firms and graduates as firms are motivated to hire more fresh graduates, and graduates are able to obtain a skill-matched career through these industrial training programmes.
Manokaran Mottain is Alliance Bank Malaysia Bhd chief economist. The views expressed are the writer’s own.