Khazanah says there is an uptrend of unemployment among those aged between 20 and 29
AFTER being laid off following the closure of the company he worked for, Joe (not his real name) started to drive a car of one of the ride-hailing companies. The 30-year-old engineering graduate makes a decent salary in his current job but talked about the difficulties of his friends who studied engineering.
Many could not find a job in the field they studied and some who continued to be engineers went abroad to work. Others started a job unrelated to their degree.
The predicament faced by such young graduates is increasingly becoming common and that trend has raised some eyebrows.
Khazanah Reseach Institute’s second report on the state of households reveals how households in Malaysia are faring. Apart from the income and debt levels of households, the report also delves into the workfoce in Malaysia and the ageing population of the country.
In notes that the number of people with tertiary education has increased over the years, from one in 16 in 1982 to one in four in 2015.
Last year, the institute says the share of employed persons with tertiary education stood at 27.4% compared with 24.1% in 2012. The share of those without an education among the employed has remained unchanged, at 3.1% in 2012 and 2015.
In its examination of the workforce, Khazanah, however, found that the proportion of workers with tertiary education has grown as a share of the unemployed and there are concerns regarding the employability of graduates in Malaysia.
The report states that in 2015, 33.8% of those unemployed had tertiary education, compared with 35.2% in 2014 and 30.6% in 2013.
“According to the Tracer Study by the Higher Education Ministry, a quarter of the 254,161 students who graduated in the same year remained unemployed six months after graduation,” the report says.
Khazanah’s report notes that the unemployment figures derived from the Tracer Study – which asks if graduates are employed six months after graduating – may not be aligned with the definition of unemployment used by Department of Statistics.
One common fact is that people with degrees tend to be better paid than those without a paper qualification but youth unemployment is on the rise.
Khazanah says young people aged 20 to 24 years as well as those aged 25 to 29 making up the two largest age cohorts of the unemployed.
“While the falling proportion of unemployed youth aged 15 to 19 is encouraging – suggesting that more youth in this age group are pursuing education – the rising unemployment rate among those aged between 20 and 29 merits concern,” it says.
Khazanah Research Institute managing director Datuk Charon Mokhzani says the institute will be seeking to understand the issue of youth unemployment by engaging in a deeper study to understand the reasons behind rising youth unemployment.
“There are more people with tertiary education in the workforce. And if you have a degree you will earn more money than a person without a degree.
“One of the things we are doing is trying to find out why there is rising youth unemployment. Is it because there are no jobs or they don’t like the jobs available?
“The idea is to talk to young people, schools, employers and teachers. We always hear anecdotal evidence but we need to find out what is going on,” he says.
Khazanah’s report says the unemployment rate has been steadily rising for the 25 to 29 age group.
“While it trended below overall unemployment before 2013, unemployment among the 25 to 29 year-olds has since exceeded the overall unemployment rate, standing at 3.5% in 2015, compared with the national unemployment rate of 3.1%,” it adds.
There have been many reasons given for youth unemployment, from skill mismatch to the lack of soft skills like a good command of the English language.
Rising unemployment among the 20 to 29 age group cohort could signal structural rather than cyclical challenges, the report says.
It points to a study done by The World Bank, which highlights Malaysian firms consistently reporting difficulties in sourcing talent as one of their top business challenges.
“Among the skills gaps listed are basic numeracy and literacy skills, as well as ‘soft’ skills such as analytical thinking, communication, and problem-solving abilities,” says the report.
Sunway University business school professor of economics Dr Yeah Kim Leng says the rising number of working age population entering the workforce can be a reason why youth employment is on the rise.
“It will continue to rise if employment creation starts to falter,” he says.
Youth unemployment is an issue in developed countries, especially Europe, which has been mired in anaemic economic for a number of years.
Retiring with insufficient funds
The other issue Khazanah raised was that as Malaysians are now living longer, they may not have enough money to last their lives after retirement.
The report says that females babies born in 2015 are expected to live to the age of 77.4, while male babies born in the same year are expected to live to the age of 72.5. This is a vast improvement compared with 1970, when female babies born in that year were expected to live to the age of 65.5, while their male counterparts to the age of 61.6, it adds.
“The thing most people take for granted is we live longer. The downside is that some of us won’t have enough money to retire on,” says Charon.
Khazanah says that with the increases in life expectancy, would a person who retires at the age of 60 be able to finance himself or herself for the rest of his or her (longer) life?
“Even if we take the average EPF savings of those in the 51 to 55 age groups at face value (disregarding the distortions caused by the top 1.6%), it seems that RM159,952 may not be sufficient to last the older age groups a lifetime.
“After adjusting for both inflation and interest rates (assumed to be at 2.1% and 3.3%, respectively, based on average 2015 figures), we estimate that this amount would only last an individual 15.6 years, if they live on the current PLI of RM930 per month for urban Peninsular Malaysia. This illustrates the concern that the population may not be well-prepared to financially support themselves as they continue to live longer,” the report says. – ANN