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Saturday, March 25, 2017

Bank Negara Malaysia Annual Report 2016: Jobless youths on the rise

Author: Tan KW | Publish date: Fri, 24 Mar 2017, 10:57 AM

By Syahirah Syed Jaafar / The Edge Financial Daily | March 24, 2017 : 10:11 AM MYT


This article first appeared in The Edge Financial Daily, on March 24, 2017.

KUALA LUMPUR: Youth unemployment has been on the rise in the country, estimated to have reached 10.7% in 2015, over three times the national unemployment rate of 3.1%, as growth in hiring has slowed since late 2014, according to Bank Negara Malaysia (BNM).

Youths represent more than half of total unemployed workers, despite only making up a third of the labour force, it said in its Annual Report 2016 released yesterday.

Among jobless youths, young graduates make up a relatively larger share of unemployed youths, at 23%, said BNM.

The report showed that youth unemployment grew at a faster clip of 1.2 percentage points (ppts) in 2015 to 10.7%, from an estimated 9.5% in 2014, compared with the 0.2 ppt rise in the national unemployment rate from 2.9% to 3.1% in the same period.

This, it said, puts Malaysia among regional economies with a youth unemployment rate in the double digits, despite a low overall unemployment rate.

Businesses have been restrained by cautious business sentiments and moderating economic performance from expanding their workforce, and youths have been the most vulnerable in this situation, it said.

“They are likely to be the last to be hired and the first to be made redundant due to their lack of experience, higher information asymmetry in the labour market, and poor ability to communicate their skills effectively to employers.”

Among working youths, the chart tends to skew towards those with lower education levels, it said. Of those aged 15 to 24, only 16% have had tertiary education, while the highest level of schooling attained by the remaining 84% is secondary education.

“Notably, youths with tertiary education make up a relatively larger share of unemployed youths (23% of total unemployed youths). Of concern, among those with tertiary educational attainment, the unemployment rate is higher at 15.3% (youths without tertiary education: 9.8%),” it said.

Chief among the factors that led to high youth and graduate unemployment, was that job creation locally has remained focused on low- and mid-skilled jobs, as domestic industries stay in low-value-added activities that emphasise cost-efficiency and dependence on cheap labour, rather than pursue innovation for more growth.

“The Malaysian economy also continues to face the challenge of attracting high-quality investments that would create more high-paying, high-skilled jobs for the local workforce,” it added. Ironically, skill shortage was highlighted in turn by firms as a key factor that prevents them from making investments to move up the value chain.

This mismatch between the changes in the workforce’s education level and the types of jobs created is seen, to some extent, “in the anaemic demand for fresh graduates, as online job postings for entry-level positions for graduates have remained largely stagnant since 2012”, it added.

Employers also continue to cite significant skill gaps among new recruits, the central bank said, with most blaming the state of the national education, and technical and vocational education and training (TVET) systems.

“The lack of industry involvement in human capital development has also contributed to the dearth of truly effective training programmes for workers,” it noted.

Going forward, the twin developments of persistent high youth unemployment and rising income inequality may constrain social mobility, and lead to increasing dissatisfaction among the populace, it warned.

This has already led to brain drain — the flight of high-skilled talent to advanced economies and neighbouring countries, in search of better jobs and pay, it said.

Addressing this problem must be made a permanent national agenda, the central bank urged. “Quality education, including an effective TVET sector, is important for building human capital,” it stressed.

Second to that is meaningful industry collaboration in education and training, followed by a comprehensive social security infrastructure, including active labour market policies (ALMP) targeting youths and displaced workers.

The Employment Insurance Scheme announced in Budget 2015, it said, contains ALMP as a main feature, including career counselling services and training schemes.

Besides “conscientious implementation” of various blueprints and programmes, it said, there must be a functional governance structure, effective monitoring, and active enhancements to existing initiatives, with careful review over time.

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