Human capital challenges for Malaysia

There’s a stark contrast between the policy rhetoric of the high skills agenda and the reality of jobs available


From the World Bank and Organisation for Economic Cooperation and Development, to regional bodies like the European Union and Asean, there is global consensus over the need for higher skills to meet the needs of the knowledge economy and the adoption of new technologies.

Governments of all countries are typically meeting such perceived labour market needs with an expansion of opportunities for higher education, which translates into increased proportions of cohorts entering higher education, with increasing disposable income in emerging market (EM) economies enabling families to choose to invest in their own human capital.

As each successive graduate cohort attempts to join the labour force, a chorus of employers around the world has repeated for several decades that graduates do not have the skills and competencies needed in employment.

Some countries have experienced high levels of graduate unemployment, particularly during times of economic crisis and uncertainty when companies are less likely to recruit, and this has also raised the question of “graduate work readiness” and even “employability”, a concept that entered policy discourse two decades ago in relation to unskilled youth and the long-term unemployed.

Throughout this time, there has been a stark contrast between the policy rhetoric of the high skills agenda and the reality of employment opportunities available. When graduates end up working in fast food outlets, “over-education” becomes another concern.

Much of the ensuing debate focuses on the assumed deficiencies of Generation Y (Gen Y), in contrast with the perfection of Gen X. In passing, we should note that Gen Y are now in leadership positions, having to cope with the “Zogs” of Gen Z who allegedly have a concentration span measured in seconds and see their mobile devices as part of a life support system from which they cannot be disconnected. Of course, this is deliberately exaggerating stereotypes, but it reflects what is often implicit in opinions that pass for analysis of generational differences.

The point is that there is little evidence- based analysis of any of these challenges of matching the skills of the workforce with the demands of the labour market — and those challenges are as evident in the most highly developed economies in Europe, as in the EM economies of Asean.

Malaysia is not immune from these challenges and three themes that have recurred in the media over the past decade have been graduates’ lack of work readiness, dependence on expatriate employees and “illegal” or undocumented workers; each is addressed below.

Rarely systematic and never comprehensive, reports of graduate work readiness are invariably anecdotal and typically report employers’ opinions that graduates lack soft skills, such as communication and teamwork, rather than technical competence associated with their specialism. Many universities are addressing these through curricula reform and increased engagement with the world of work — we are fixing these problems.

However, employers also often complain of a lack of motivation and commitment, and of “unrealistic aspirations” on the part of graduates. Here we enter muddier waters and are back to the deficiencies of younger generations, on which older generations inevitably have expert knowledge! If unrealistic aspirations means expecting a graduate salary for doing graduate work, it is difficult not to take the graduates’ side; they have invested time and money in developing their human capital and are seeking a return. If they are unrealistic in aspiring for the autonomy and opportunity to show what they are capable of achieving, their lack of motivation and commitment may be a reflection of the unimaginative and restrictive design of jobs they occupy.

Much of the discussion on Malaysia’s dependence on foreign workers assumes these are highly skilled and that the number of expatriates will diminish with the increasing educational attainment of the Malaysian labour force. World Bank data show Malaysian educational attainment has grown substantially, with the proportion of current school leavers registering in tertiary education about 37% compared to 19% of those aged 25-54, 7.6% of those aged 55-64 and 3.9% of those over 65 holding tertiary qualifications.

At the same time, the percentage of the unemployed with tertiary qualifications grew from 9% in 1995 to 29% in 2014. The increasing availability of tertiary educated Malaysians does not seem to have reduced the appetite for importing labour, so this could reflect a skills mismatch of graduates or the largely unskilled nature of the majority of jobs in which foreigners work.

An expat worker in Malaysia is more likely to be a gardener from Bangladesh than a chartered engineer from Germany. It is never easy to assess the number of undocumented workers in any economy, but recent estimates suggest 400,000 “illegal” overseas Filipino workers in Malaysia and probably similar numbers of Indonesians, especially in East Malaysia. By definition, undocumented workers do not appear in official labour statistics so this is a difficult area to research, but we know that undocumented workers are found extensively in construction, restaurants, retail and domestic work, and even individuals working in higher education.

If the Asean commitment to a single market is to have any meaning, there must be free movement of labour within Asean, which would bring undocumented workers under legal regulation and make it possible to more accurately assess their contribution to the Malaysian economy.

At the same time, such decriminalisation of the victims would remove opportunities for human trafficking, modern slavery and corruption of officials associated with such practices.

One common theme that relates to all three challenges is the nature of jobs available and the extent to which the country is really en-route to creating a knowledge-intensive economy with an increasing proportion of highly skilled jobs. To the extent that Malaysia succeeds with this aspirational transformation, the next question is how far the higher education system aligns with the labour market.

It is also pertinent to explore the way that work is organised, and in particular the extent to which jobs in the new economy facilitate the use and further development of employees’ skills.

There is solid evidence from Europe that more than one third of employees are unable to deploy the skills they possess and that this has implications for productivity and employee wellbeing.

Employers who develop high involvement work processes succeed in achieving both higher productivity and enhancing employee wellbeing, the only sustainable route for economic progress through technological advances.

Jonathan Winterton is professor of employment and executive dean of the Faculty of Business and Law at Taylor’s University, Malaysia. The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.