Underemployment a hindrance to economic recovery


THE increasing level of underemployment, where people are working at jobs below their qualifications, could lead to social unrest, mental problems and higher crime rates, and escalate to other economic woes as the nation struggles to get back on track with all the necessary recovery plans.

Putra Business School Associate Prof Dr Ahmed Razman Abdul Latiff said the underlying issues would also slow down any expected economic recovery this year.

“Both high unemployment and underemployment will put additional burden on the government in terms of social expenditures. The negative impact will not just affect the individuals, but the household and surrounding communities,” he told The Malaysian Reserve (TMR).

Malaysia’s unemployment rate rose 4.5% in 2020, the highest that was recorded since 1993, according to the Department of Statistics Malaysia.

The skill-related underemployment, which comprises those with tertiary education but working in semi-skilled and low-skilled occupations, accounted for 1.89 million persons or 37.4% of the total employed persons with tertiary education.

The unemployment rate in January rose to 4.9% from 4.8%, ascending by 9,700 people to 782,500 from 772,900 in December.

Ahmed Razman said the latest statistic on unemployment is worrying especially, judging from the number of employed persons.

“Even though the data showed a marginal increase by 0.1% or 21,900 persons to 15.24 million persons in January 2021, if we compare the number of employed persons one year ago, it has remained in a declining trend year-on-year by recording -0.5% or equivalent to 80,300 persons (January 2020: 15.32 million persons).

“That means we have yet to create new jobs for the past one year and at the same time, the number of unemployed continues to increase,” he said.

He said a larger percentage of semi-skilled and low-skilled occupations have come from those with tertiary education, which also highlights the jarring mismatch in the job market.

Ahmed Razman said these are among the huge challenges that the government needs to tackle in the next few months.

“The outlook for the job market remains positive as the number of employed people has continued to rise on a month-to-month basis albeit with a slow rate.

“Once the government started to execute fully all career initiatives under Budget 2021 such as Employment Recruitment Incentives Programme and Short-term Employment Programme with the allocation of RM3.7 billion and the promise of the creation of 500,000 jobs, the unemployment and mismatching issues will be addressed properly,” he added.

Meanwhile, Institute for Democracy and Economic Affairs senior fellow and Centre for Market Education CEO Dr Carmelo Ferlito said there is a mismatch between what fresh graduates expect and what the employers are looking for, which can create frustration on both sides.

In the current situation, he said it can be hard even to find a basic administration employee because expectations on the labour side remain very high despite the rising unemployment.

He said this could create a situation in which employers will feel more and more attracted by foreign workers (not only for dirty, dangerous and difficult jobs), while Malaysians remain frustrated as underemployment could grow further.

“I believe it partially reflects the situation created by the movement restrictions, but it also reveals a long-term underlying trend. Such a trend is the consequence of mass education.

“With an education system designed to provide tertiary education for all, and a growing cultural pressure to get graduated, it is only normal that not everybody can get a job consistent with the title on the paper. In this sense, the pandemic has only worked as an accelerator of an underlying trend,” he told TMR.

With the reimplementation of Movement Control Order (MCO), Ferlito said one could only expect the next figures to be worse, both in terms of unemployment and underemployment.

He said Malaysia currently needs two different actions. Firstly, the government has to identify a consistent strategy for economic recovery, which looks at open borders and to avoid new rounds of restrictions; preconditions on the way out of the tunnel.

“The second is education reform in which tertiary education steps up in terms of quality and selectivity, to attract only talents that aim specific high-level positions.

“On the other side, secondary education should be reformed to introduce professional skills, allowing people to access the job market without going to college,” he added.

Accounting skills, for example, can be taught in secondary schools, while tertiary education should be reserved for scholarly work and liberal professions.

Ferlito said similarly, the role of vocational schools should be rediscovered, to create skilled workers for factory works and help the transition outside of labour-intensive production processes.

Meanwhile, Emir Research analyst Sofea Azahar said focus should be centred on underemployment which has existed quite significantly even before the pandemic and is on an increasing trend.

She said since the underemployed talents are either in semi-skilled or low-skilled jobs, she said there is an underutilisation of the valuable human capital.

She said they are also not paid the appropriate wages, causing an unequal distribution of income (inequality) and distorting the labour market.

“Going forward, the labour market will remain challenging as long as the economic uncertainty persists — given that the whole nation is still under MCO.

“Interstate travel ban has also not been lifted while the National Covid-19 Immunisation Programme is still ongoing which would limit the recovery pace,” she told TMR.

Therefore, she said businesses would be on the lookout and try to minimise their costs as much as possible.

“But it is also important for the businesses to make it through the unprecedented crisis by ensuring the standard operating procedures are observed by the people.”