The State of the Nation: Incentives to hire, upskill and retrain youth needed in Budget 2021

This article first appeared in The Edge Malaysia Weekly, on October 12, 2020 - October 18, 2020.
The State of the Nation: Incentives to hire, upskill and retrain youth needed in Budget 2021
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LIKE most of his peers, Kenji Tng is waiting for a call from a potential employer. Since completing his university education in July, he has sent out nearly 40 applications, looking for work in financial institutions, banks and consulting groups, and attended 10 interviews.

“I’m a little anxious. I cannot be choosy in the current [economic] climate but I do want to begin my career on the right foot. I am concerned that were I to be held up any longer, I wouldn’t be considered a fresh graduate,” says the 22-year-old, who has a Bachelor of Business and Commerce degree from Monash University.

“A few of my friends who worked as interns were offered full-time jobs, while a few others received offers through recommendations. However, most of us remain unemployed. I have enrolled in a free online course on coding and programming to expand my skill set.”

Tng is not alone. With thousands of graduates entering a job market weakened by the Covid-19 pandemic, many will rightly be anxious about securing employment.

The Department of Statistics Malaysia estimates that 300,000 to 350,000 fresh graduates will enter the labour market this year. It adds that the country’s unemployment rate peaked at 5.3% in May and eased to 4.7% in July. However, nearly 750,000 people are still unemployed.

“Pre-Covid-19 unemployment hovered at 3.3% — that is about half a million people out of a job. Meanwhile, youth unemployment — those within the ages of 15 and 24 — rose to about 320,000, or 13.9%, in July from the trend of 10% to 11% over the past decade,” Sunway University Business School professor of economics Dr Yeah Kim Leng tells The Edge.

For perspective, unemployed graduates who held degrees and diplomas totalled 145,800, 154,900 and 162,000 in 2016, 2017 and 2018 respectively. How will the government help this group? What could be in store for them in Budget 2021, which is due to be tabled on Nov 6?

Institute for Democracy and Economic Affairs’ economics and business research manager Lau Zheng Zhou says the budget may address youth unemployment by providing living subsidies; income and job protection by sharing the cost of hiring with employers; skills training and incentives for apprenticeships; and incentives for the promotion of e-commerce platforms.

“The budget may also include assistance with rental payment as many youth relocate to Greater Kuala Lumpur and other urban areas for a job,” he says, adding that the budget may include incentives to address the low rate of women in employment since only 55.1% of women — as reported by DOSM — are either employed or looking for a job in the labour force, while many drop out around the age of 30.

“With working from home [being] the norm, the budget may look at incentivising employers further to help women re-enter the job market while maintaining household responsibilities.”

Since March, the government has announced various initiatives under the Prihatin Rakyat Economic Stimulus Package (Prihatin), Prihatin SME Plus, National Economic Recovery Plan (Penjana) and Prihatin Supplementary Initiative Package (Kita Prihatin) in an effort to blunt the effects of movement restrictions triggered by Covid-19.

Among the initiatives that have a direct impact on youth are the RM1.5 billion Hiring Incentive Programme and reskilling and upskilling programmes for youth and unemployed workers, involving an additional RM2 billion.

In Budget 2020, the Pakatan Harapan government had attempted to tackle the problem of youth unemployment through the [email protected] programme — also known as #MalaysiaKerja — comprising initiatives for graduates and youth in technical and vocational education and training (TVET) courses. The programme is a stimulus package that aims to create up to 350,000 jobs over the next five years. Under the scheme, graduates who remain unemployed for over 12 months will receive a wage incentive of RM500 a month for two years, and their employers, a hiring incentive of RM300 a month over the same duration.

[email protected] also hopes to encourage more youth to take TVET courses by offering trainees on apprenticeship an additional RM100 a month for their allowance as well as giving participating companies additional tax incentives. Having commenced in the second quarter of this year, the programme is being carried out in stages and facilitated by the Ministry of Finance through the Employees Provident Fund.

Yeah points out that since wage subsidy programmes have been helpful in reducing retrenchments, a similar targeted and time-bound initiative could enable job entrants to gain work experience as they showcase their talents to potential employers over stints of six months or longer. Besides incentivising employers, the government could fund or collaborate with industry associations and skills training institutions to develop new business start-ups and entrepreneurship schemes, or expand existing ones for the youth.

“Such programmes could be paired with initiatives to boost the gig economy, including farming out supporting and ancillary public services to freelancers. To encourage companies making large investments to hire youth, special incentive programmes could be designed to subsidise recruitment and on-the-job training costs,” says Yeah. He adds that carefully designed support could be provided to distressed corporations with large workforces.

While expanding the wage subsidy schemes will have a large fiscal cost, the government could consider matching the funds to share the risk and spread taxpayers’ money between more firms, says Yeah.

Skills for the future

To bridge the gap between employers’ expectations and young adults’ skill sets, a reorientation of government-run industry training programmes could meet the changing needs of the industries. For instance, given strong demand for the requisite digital and information technology skills to migrate existing businesses to e-commerce platforms, complementary skill-matching and job placement initiatives may enable job seekers to find suitable employers and vice versa.

“The fact is also that new jobs are being created as macro-trends shift and technology advances. Many of our graduates and youth do not have the skills and behavioural aptitude that are market-ready. Budget allocation can be made to centralise efforts in identifying skills that the market needs and create programmes that emphasise new skills such as programming, data analytics and social media analysis,” says Lau.

Yeah stresses that while the government-run labour market information system has seen improvements, more effort could be directed at enhancing job market information efficiency and transparency of salaries and wages.

“Covid-19 aside, a key reason for youth unemployment is talent mismatch and a lack of industry knowledge,” says Kelly Services managing director and country head of Malaysia Brian Sim.

For this reason, the government introduced the Skim Latihan 1Malaysia (SL1M) programme in 2011, specifically to provide employment opportunities and training for Malaysian youth.

According to Sim, Kelly Services, through its sister company Persolkelly, has participated in governmental employment initiatives, training and securing jobs for more than 1,000 Malaysian youth under the SL1M programme since 2016.

“Some of our best employees in Kelly Services were absorbed through the SL1M programme. We have witnessed how it is possible to transform unemployed and unskilled individuals into award-winning industry professionals. All that is required is appropriate guidance and an opportunity to prove their value,” says Sim.

Hays Malaysia managing director Tom Osborne concurs that the provision of subsidies and benefits to companies to hire graduates as well as subsidies for technology would be helpful, as most workplaces are practising a hybrid working arrangement and, thus, the internet and laptops are essential in ensuring a smooth transition to the remote workplace.

In addition, training programmes for undergraduates to upskill during the “down period” to prepare them for the Fourth Industrial Revolution (IR 4.0) and post-Covid-19 workforce would be useful, says Osborne.

Lee Heng Guie, executive director of The Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre, says the government must ramp up its efforts to support businesses and the unemployed by providing subsidies and tax rebates to aid the reskilling and upskilling of workers.

“The government needs to think of one to three months of training through tie-ups with the sectors. There have been significant new job opportunities and short-term demand surges in the food and grocery delivery services and information and communication technology sector as well as healthcare-related services. Digital literacy and data solution services as well as technology-enabled management programmes must be developed to enable the workforce to be technically ready to meet current and future skill trends,” says Lee.

The Edge survey finds youth pessimistic about job prospects

By Areeshya Thevamanohar and Chee Gee Ren

 

Data on youth unemployment since the outbreak of the Covid-19 pandemic has been unsettling, although the job market seems to have turned a corner. However, a recent dipstick survey by The Edge among young people shows that a majority are quite pessimistic about their employment prospects for at least another year.

The pandemic-induced recession took youth (those aged 15 to 24) unemployment to a peak of 14.2% in May this year, much higher than the 11.9% recorded in 2009 on the back of the global financial crisis, according to data from the Department of Statistics Malaysia (DOSM).

By July, however, muted signs of recovery brought youth unemployment down to 13.9%.

There is little cause for optimism, however, as Khazanah Research Institute’s (KRI) researchers Nur Thuraya Sazali and Mohd Amirul Rafiq Abu Rahim take the view that the economy, which Bank Negara Malaysia forecasts will contract between 3.5% and 5.5% this year, is not expected to create new jobs soon.

This trend is nothing new. “Based on previous data since 1982, what we have observed is that the youth unemployment rate (among the 15-to-24 age group) is on average three times [the] overall or national unemployment rate,” the KRI researchers said via e-mail when contacted by The Edge.

Young people are clearly concerned about their job prospects, as the survey in August showed.

The online survey was conducted among 268 young people aged 18 to 25, 92.5% of whom were tertiary-educated in universities, community or vocational colleges.

The participants were divided into three groups: students, employed graduates/school leavers and unemployed graduates/school leavers.

Of the 268, 88 (32.8%) are still in school, 119 (44.4%) are employed graduates/school leavers, and 61 (22.8%) are unemployed graduates/school leavers.

On the respondents’ view of their job prospects and security, the answers vary.

Among unemployed graduates and school leavers, 70.4% are not confident of getting the jobs they want.

For students, 38.6% are not confident of getting the jobs they want. For employed graduates/school leavers, only 19.3% are not confident of keeping their jobs.

Surprisingly, the government’s efforts to stimulate employment through its Prihatin and Penjana stimulus packages have seen limited effect among the youth. Some 75.4% of unemployed youth surveyed said they did not benefit from these initiatives. This was also the case for 73.9% of those surveyed who are employed.

The issue may not lie with Penjana (which offers wage subsidies, hiring incentives, reskilling and upskilling programmes and cash aid), as some respondents suggested that it was not marketed widely enough.

Notably, the impact of Covid-19 on job prospects is not Malaysian youth’s biggest concern. Instead, they pointed to underlying structural issues that plague the labour market.

Malaysia’s low wage level is a major concern, with 36.2% citing this as a worry, followed by the limited number of jobs matching their selected fields (27.2%).

A majority of the youth surveyed indicated that they expected only meagre earnings of RM2,000 to RM3,000 from jobs on the market. The World Bank’s Malaysia Economic Monitor last year reported that the annual median wage growth among younger workers stood at 2.4%, trailing the 3.9% growth for older workers.

On the mismatch of jobs, the youth surveyed preferred to venture into professional services such as finance, accounting and law, but there were too few job openings in their chosen industry. In email comments to The Edge, however, KRI observed that the services sector in Malaysia was dominated by low-skilled, “traditional” services such as food and beverage (F&B), versus “modern” services such as professional and financial activities.

Only 22.8% of respondents said the economic fallout from the pandemic was their biggest concern regarding job prospects. Among unemployed youth, Covid-19 emerged as their biggest concern, with 41% seeing their job prospects dimmed because of the pandemic.

The survey confirms that the twin elements of limited opportunities and low wages are among a range of push factors that are sending Malaysia’s talent in search of jobs overseas.

A significant 57.8% of respondents said they had considered looking for a job overseas mainly because of the promise of better wages and job opportunities, which is indicative of a brain drain in the domestic labour market.

Another important point highlighted by some respondents is the need for support from the government and businesses.

Respondents ranked hiring incentives and reskilling and upskilling initiatives as the most helpful interventions for improving their employment prospects.

On this point, KRI noted that hiring incentives may only minimise job losses in the short run without generating new jobs, but commended reskilling and upskilling initiatives as a step in the right direction.

Sunway University economics professor Dr Yeah Kim Leng says information sharing is key, and that career counsellors in schools, colleges and universities should make students aware of the various subsidies, incentives and reskilling programmes to prepare them for entry into the workforce.

He suggests that the relevant ministries collaborate to hold career fairs, conferences and workshops to publicise various hiring programmes and incentives. Social media could be harnessed to get the message out, he says.

Pandemic aside, Yeah believes slower job creation and subdued investment activities are key structural factors keeping youth unemployment at a persistent double-digit figure.

That is not all that young job-seekers face. Employers prefer staff with work experience and are reluctant to incur the high cost of training fresh workers.

Then, there are the problems of a skills mismatch and the reluctance of Malaysian workers to take on semi-skilled and 3D jobs, he adds, referring to the dirty, dangerous and difficult work shunned by locals. This ties in with the observation that while a young workforce is looking for high-quality jobs, employers are focused on keeping labour costs low.

In its School-to-Work Transition Survey (SWTS), KRI reported in 2018 that 95% of young respondents with unskilled jobs and 50% of those with low-skilled manual jobs were found to be overeducated for the work they were doing. This highlights the issue that the country is not putting its labour force to optimal use.

“This particular finding that youth are taking up jobs they are overqualified for is not surprising, considering that more than half of the job vacancies fall under elementary or unskilled occupations,” says KRI.

McKinsey & Co senior partner Nimal Manuel believes the temporary decline of some industries also provides an opportunity for upskilling towards future areas of skills growth.

“First, governments, business associations and educational institutions should be asking themselves: How do we use the downturn to retrain and future-proof our workforce?” he says.

Nimal proposes rapid upskilling for short-term demand surges such as in grocery retail during the pandemic, and longer-term upskilling or reskilling that enables individuals to move into careers aligned with future trends, such as healthcare services.

“Longer-term interventions could also focus on digital literacy and social and emotional skills — the building blocks that workers need to stay relevant in a more dynamic and digitalised labour market,” he adds.

He also suggests building online “talent exchanges” to increase transparency on job openings and facilitate redeployment of workers.

“There is an urgent need for transparency on changing demand, growing job opportunities, and information on existing skills that may be underutilised and for better, faster matching between job seekers and employers,” Nimal says.

Beyond government assistance, he notes that businesses play a big role, as they are on the front lines of the workplace as it evolves, which would require them to both retool their business process and re-evaluate their talent strategies and workforce needs.

He cites an example at US-based telecommunications company AT&T, which offered its employees opportunities to enrol in online computer science programmes at a university to fill current skill gaps.

Nimal says a crisis of this degree calls for a mindset shift towards the greater good of society as opposed to focusing on competitive advantage for a specific company.

“Companies that otherwise would be business competitors often have opportunities to collaborate and provide reskilling at an industry level. There is also a role for governments to facilitate this shift,” he adds.

In the meantime, according to KRI, young people do not have to wait for change, but can resort to creating their own jobs through self-employment.

“Skilled youth have the advantage of ‘exporting’ their services abroad and can earn income from selling their skills instead of tangible products,” it explains.

While self-employment offers more opportunities to generate income, it is often more unstable with limited labour and social protection, KRI adds, citing a report by the DOSM that found that self-employed workers were the worst hit by the pandemic.

“While we have to acknowledge the existing programmes under Socso and the EPF, further improvements can be made by extending financial support [to] unemployed individuals who are working towards becoming self-employed,” KRI says.

 

This report is based on an online survey designed and conducted by two interns at The Edge. Areeshya and Gee Ren returned to Malaysia when overseas students were sent home, following the outbreak of the Covid-19 pandemic.

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