UNDEREMPLOYMENT is a growing problem, especially among graduates, amid the emergence of flexible gig work and the lack of job opportunities in the labour market. It signifies the under-use of the labour force’s productive capacity.
Research on mismatch occurrences of graduates in Malaysia found that a significant proportion of them accept jobs that do not align with their fields of study.
According to the 2022 job placement data from MyFutureJob, which was released by the Social Security Organisation, nearly 40% of graduates are underemployed, occupying semi-skilled and low-skilled positions.
The Statistics Department categorised underemployment into skill-related under-employment and time-related under-employment.
Skill-related underemployment is when highly skilled workers work in low-paid or low-skilled jobs, usually not requiring a degree or diploma, whereas time-related underemployment occurs when the number of hours worked is below that of the worker’s availability and ability to work, commonly the threshold being 30 hours per week.
In the most recent 2021 graduate statistics by the Statistics Department, out of 4.57 million employed graduates, 2.9% were time-related underemployed, while 33.9% were skill-related underemployed.
It is evident that Malaysia is facing skill-related underemployment, which is a significant challenge for those entering the job market for the first time.
In recent years, there has been a noticeable uptick in underemployment. There has been a steady rise in the number of graduates from higher education in Malaysia since the implementation of educational reforms in the 1990s.
Malaysia made substantial investments in human capital as it transformed from an agriculture-based economy to a modern service-based economy. Education is linked to individuals’ ability, productivity and future earning potential, incentivising people to invest in education.
Additionally, the increasing demand for advanced qualifications in the job market compels people to pursue higher education to remain competitive in the labour market.
However, when an increase in tertiary-educated workers does not correspond to the flexibility of the labour market and a sufficient number of adequate jobs, there is a high possibility that these workers will end up underemployed.
Despite ongoing challenges in the public and private sectors to generate and maintain a significant number of positions demanding graduate-level skills, the government has demonstrated a keen interest in producing many university and college graduates. This has led to a substantial mismatch between the number of graduates that industries can absorb and the increasing surplus of graduates entering the workforce.
Reportedly, the labour market in Malaysia needs more high-skilled jobs to accommodate the growing number of educated workers.
Data shows that most jobs in Malaysia are in the semi-skilled category. The Employment Statistics for the third quarter of 2022, as reported by the Statistics Department, indicate that during this quarter, semi-skilled positions accounted for 62.3% of the total jobs, while skilled and low-skilled categories constituted 24.9% and 12.8%, respectively.
Compared with the figures from 2020, there is a decrease in skilled workers from 28.2%, an increase in the share of semi-skilled workers from 59.9% and an increase in the share of low-skilled employment from 11.9%, which is worrying.
Since 2016, there has been a downtrend in tertiary school enrolment in Malaysia, one of the reasons being the lack of high-skilled job opportunities. Nevertheless, a large number of high-skilled graduates enter the labour market every year, apparently, with no corresponding growth in high-skilled jobs but a decrease.
The rate of growth in high-skilled jobs, which has only increased by 0.2% since the third quarter of 2021, is outpaced by the increase in the number of tertiary-educated labour force.
The jobs produced in Malaysia are mainly based on sectors that usually require low and medium-skilled jobs.
According to the Employment Statistics, for the third quarter of 2022, the services sector dominated the job market, accounting for 51.9% (4.50 million) of total jobs and 52.7% (4.47 million) of filled positions.
In terms of job creation, 51.5% were concentrated in the services sector, followed by manufacturing, with a share of 32.0%, and construction, with 11.5%. This suggests the presence of a structural issue within the economy, characterised by a deficiency in high-skilled industries, causing a mismatch between skills and jobs.
Human Resources Minister V. Sivakumar previously mentioned that early intervention is necessary for skills mismatch as failure to do so can result in as many as 4.5 million Malaysians losing their jobs by 2030.
The disparity within the labour market, resulting in the underutilisation of labour, presents a severe problem for the nation – labour underutilisation imposes costs on individuals and the economy through reduced productivity and income loss.
Investing in higher education is akin to subsidising other economies because individuals who graduate with high skills and knowledge but are unable to secure matching jobs in the home economy will contribute to a “brain drain” situation.
Empirical research has identified the inability to secure a job that matches one’s skill level as one of the driving factors behind the Malaysian brain drain.
A shortage of available jobs often intensifies competition in the labour market, prompting individuals to turn to gig work as an alternative.
While gig work offers greater flexibility and the potential for higher earnings, it is still categorised as underemployment because the qualifications of individuals in these positions are frequently not fully utilised or aligned with their career aspirations and, therefore, do not contribute to national development.
With data on job mismatch in Malaysia limited, the government must ensure that up-to-date and accurate information on this issue is available as underemployment usually underestimates the unemployment rate.
We must also recognise that underemployment affects not only youths and graduates. It is vital to explore determinants of underemployment to gain better insights into who is most susceptible to this social issue within society, enhancing our understanding of its significance.
Numerous findings have demonstrated that a person’s educational background, age, work experience, gender and marital status are important factors in determining the likelihood of underemployment.
For example, research indicates that both time-related and skill-related underemployment are more prevalent among women than men.
Women frequently choose jobs that offer flexibility but lower pay to accommodate their family caregiving duties. Additionally, females with children face an increased risk of underemployment because of their parenting responsibilities.
Marital status is significantly related to time-related underemployment, where married workers with children are less likely to be time-related underemployed than single persons.
Underemployment has several profound negative impacts on individuals, families and society, be it economic, social or psychological.
Misalignment of jobs and skills will stagnate career development, limiting opportunities for skill development and professional growth.
Underemployment can make it difficult for people to obtain jobs in their desired field, turning it into a dire condition as their skills and experience may become outdated or irrelevant over time.
One of the most immediate consequences of underemployment is financial strain as the underemployed may struggle to make ends meet or support themselves and their families. This can lead to increased debt, poverty and even homelessness in some cases.
Prolonged underemployment, with variations in underemployment among different educational, gender and geographical domicile groups, can intensify income inequality.
Underemployment can also have negative mental health consequences, including depression, anxiety disorders and substance abuse, as people may experience feelings of frustration, stress and anxiety due to their work situation.
To address underemployment in Malaysia, we need to implement policy reforms and develop adaptive strategies for job seekers.
To bolster skills development and address workforce needs, we need to invest in Technical and Vocational Education and Training programmes (TVET), equipping individuals with relevant skills for in-demand jobs.
Despite various government labour market empowerment initiatives, such as the employment transition programme for TVET graduates, there is a need for additional efforts to promote them to the public using innovative approaches.
Simultaneously, we need to promote lifelong learning by offering incentives for adults to continuously upskill and reskill, ensuring adaptability in their careers.
Supporting entrepreneurship with financial aid, mentoring and start-up incubators can help promote job creation, skills development and the growth of new industries, fostering economic diversification. A diversified economy will provide more job opportunities, reducing underemployment risks in specific sectors.
The government can also enhance job-matching platforms, such as MyFutureJob, to broaden their reach and effectiveness in connecting job seekers with suitable opportunities as well as provide job counselling and placement services, assisting individuals in discovering roles that align with their skills and aspirations, thus fostering more meaningful and fulfilling career paths.
A crucial step in addressing underemployment is a shift in the economy’s structure. With a growing number of educated individuals, there must be a simultaneous increase in high-skilled job opportunities for optimal utilisation of the workforce.
To achieve this, the economy needs to transform by promoting promising sectors that are experiencing high growth and have high-skilled labour demand worldwide, such as technology, green energy and advanced manufacturing, which can drive economic growth.
Urgent action is needed to transition low-productivity, low-skilled sectors into high-productivity, high-skilled ones.
Underemployment is a serious problem with far-reaching consequences for individuals, families, communities and the economy.
Addressing underemployment requires a multifaceted approach that involves individuals and policymakers, focusing on strategies that support job creation, workforce development, access to information and resources and career counselling.
The writers are part of the research team at Emir Research, an independent think tank focused on strategic policy recommendations based on rigorous research. Comments: email@example.com