Youth unemployment rate still high

This article first appeared in The Edge Financial Daily, on May 4, 2018.
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KUALA LUMPUR: Malaysia’s still-high youth unemployment rate — hitting a record 10.8% last year — was likely due to skill mismatch, said MIDF Research in a report yesterday.

The rising youth unemployment rate was mainly contributed by the soaring numbers of unemployed graduates, about 204,000, constituting 40.5% of total unemployment.

“We believe the rising youth unemployment rate is possibly due to  skill mismatch. For instance, out of all job vacancies last year, 76% were for elementary occupations, followed by 10.3% for plant and machinery operators and assemblers,” the research firm wrote in the report which was based on data from the Department of Statistics Malaysia.

While low-skill jobs made up a total of 86.3% of job vacancies in 2017, high-skill job vacancies more suited for fresh graduates, such as professionals and technicians and associate professionals, accounted for a meagre 4.1% of total job vacancies.

Nationwide, Melaka, with a youth unemployment rate of 2.9%, continued its seven-year streak as the state with the lowest youth jobless rate, while Sabah recorded the highest at 13.5% in 2017.

“Meanwhile, Selangor, the largest employer with 23.2% of total national employment, saw overall unemployment rate of 2.8% and youth unemployment rate of 9.4% last year,” MIDF Research added.

Only three states recorded lower youth unemployment rates, namely Johor, Kuala Lumpur, and Kelantan.

Globally, Malaysia’s youth unemployment rate is considered normal according to MIDF, despite other Asian countries such as South Korea and Japan seeing lower youth unemployment rates at 8.9% (2016: 10.7%), and 4.7% (5.2%), respectively.

“Skill mismatch and market uncertainties remain as challenges for every economy in tackling the issue of high youth unemployment rates,” it added.

Despite growing youth unemployment, the overall unemployment rate remained low at 3.4%, shrinking by -0.3% to 503,000, while the labour force and employment rate rose by 1.9% and 2% respectively last year.

Looking forward, MIDF Research forecasts that Malaysia’s unemployment rate will fall to an average of 3.3% for 2018.

The steady expansion in both the labour force and employment last year was indirectly due to robust macroeconomic performance, it said.

“GDP (gross domestic product) growth recorded 5.9%, the fastest in three years. In addition, the strong economic growth was supported by soaring export growth of 19.3% and the sturdy pace in overall IPI (Industrial Production Index) of 4.4% in 2017.

The spillover effects of the surge in external trade and industrial activities last year indirectly boosted employment growth and lower unemployment rate in Malaysia,” MIDF said.

The firm forecasts exports and IPI to expand by 9.3% and 4.2% respectively in 2018.