Ideas: Is SL1M solving the problem of youth unemployment?

This article first appeared in Forum, The Edge Malaysia Weekly, on March 12, 2018 - March 18, 2018.
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Skim Latihan 1Malaysia (SL1M) is a training programme aimed at alleviating the plight of unemployed youth. The cause of this problem is said to be a mismatch between the skills of graduates and the needs of companies as well as a lack of soft skills among graduates.

The programme has a network of government-linked companies and private firms providing job training and soft skills development for participants.

Since its inception in 2011, there have been numerous claims asserting the programme’s success in tackling unemployment, with 46,700 participants having found jobs.

Effective this year, companies have to provide an allowance of RM2,000 for each SL1M participant — an increase of RM500 from last year.

The government has, from this year, allocated RM40 million for SL1M to hold road shows. Participating companies are given double tax deduction incentives, and the costs for any training conducted are claimable through the Human Resources Development Fund.

The question now is whether such a programme is justifiable when what it delivers can be promised through an existing and well-known alternative — internship. Is the increase in public spending warranted to tackle the problem of unemployment among the young?


Other countries’ experience

Japan experienced a surge in youth unemployment following a financial crisis in the 1990s, so much so that a group of people who were out of work were driven into seclusion — colloquially termed hikikomori. The country managed to recover and maintain one of the lowest rates of unemployment in the world after only having spent 0.3% of its gross domestic product on labour policies, which is half the global average.

Japan achieved this feat by issuing what is called “chasm” — a coverage that imposes stringent restrictions on the eligibility for unemployment benefits. The absence of a social net pushed its citizens to find jobs.

Traversing down south to Australia, the country has since abolished its public employment services. Today, there are over 100 providers of employment services (PES) that offer the same services that SL1M does. These PES compete on the basis of pay-for-performance as an incentive to train and link candidates to employers.

These alternatives differ in the sense that they do not cause disruptions in private enterprises. Companies in the SL1M programme ensure employment by providing incentives. However, these incentives from tax deductions may not be able to compensate for the shortcomings in productivity. There is always a limit as to how many a company can hire, and that limit is determined by the cost of capital. The amount of labour is capped by capital, and productivity will decline if more capital is not brought in.


A problem of education

SL1M is aimed at resolving the problem of inadequate skills of young graduates. However, the main reason for the mismatch between graduates’ skills and industries’ needs is due to poor basic education.

Based on the World Bank’s 2015 PISA scores, two-thirds of Malaysians performed below the basic level of proficiency. This suggests that our students have low numeracy and literacy skills.

The problem of youth unemployment is synonymous with the relationship between education and work. As a response to a lack of professionalism and sought-after skills, companies had tried to bridge this gap by providing training similar to that of SL1M.

However, the training did not have much effect on providing skills required by employers and, thus, the companies ceased doing it.

According to The Economist, only 17% of the participants said they had learnt something from the programme. Meanwhile, data released by global professional services company Accenture shows that only one in five participants learnt the necessary skills through such programmes.

The SL1M initiative can be termed as a supply-side intervention by providing counselling, training and job search assistance — all of which connect youth to jobs but have a disappointing impact, according to the World Bank-led coalition, Solutions for Youth Employment.

The coalition purports that for youth to have access to fulfilling jobs, there have to be more linkages between school and work. The Economist points to Germany as an example. The country has had a long tradition of superb vocational education and an admiration for apprenticeship that has a compounded effect on reducing youth unemployment. The friction between the point of graduation and employment is a problem of transition. And that transition should be absorbed within the curricula of schools.

The problem of youth unemployment does indeed exist. And it is a pressing one. However, the attempt to solve this problem should come from measures that have a long-term impact capable of inducing change. Education should be improved to serve market needs and specifically, tertiary education should provide degrees that signal “marketability” to employers.

Aryudin Proehoeman is a research intern at the Institute for Democracy and Economic Affairs

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