KUALA LUMPUR (March 23): Youths unemployment has been on the rise in the country as growth in hiring slowed since late 2014, and was estimated to have reached 10.7% in 2015, over three times the national unemployment rate of 3.1%, according to Bank Negara Malaysia (BNM).

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

“In 2015, youth unemployment rate increased by 1.2 percentage points from an estimated 9.5% to 10.7%, while the national unemployment rate increased by only 0.2 percentage points (2.9% to 3.1%) during the same period,” said BNM in its Annual Report 2016 released today.

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 factors that led to high youth and graduate uemployment 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, skills 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 types of jobs created is seen, in 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, BNM 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 towards 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, BNM said, contains ALMP measures as a main feature, including career counselling services and training schemes.

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