12MP: Roadmap for resolving graduate underemployment and mismatch

THE onset of the Fourth Industrial Revolution has witnessed the rapid technological innovation and adoption on a global scale.

From an industrial perspective, this has been driven by the need to spur productivity levels. It has been widely acknowledged that the COVID-19 pandemic has accelerated the transition.

Thus, in order to allow the country to move towards a phase of sustainable and equitable growth, several issues need to be resolved in terms of the labour market especially within the scope of skilled employment.

Historically, Malaysia has depended on an economic growth model which was underscored by low-cost production arising from cheaper cost structures.

Consequently, industries have relied heavily on low-skilled foreign workers which act as a disincentive for private investment leading to productivity enhancements.

This depresses real wages for low-skilled workers and shifts the focus on creation of low-skilled jobs.

In the long-run, a low-cost business model with reliance on labour intensive production would tend to act as an impediment for creation of high-skilled and high-paying jobs.

Therefore, productivity gains would not translate into wage gains.

The root cause has been traced to lack of business sophistication. This hampers innovation, which leads to low creativity levels, lack of knowledge gains and poor technological advancements.

Due to structural issues that result in a lack of creation of high-skilled jobs, many high-skilled graduates eventually end up in mid-skilled and low-skilled occupations.

Thus, the Malaysian labour market for graduates paints a picture of skill-related underemployment.

Additionally, Malaysian employers have consistently reported shortage of cognitive ability, communication skills, inter-and-intrapersonal skills as well as digital literacy among graduates entering job markets.

The mismatch between skills required by industry and that the talent leads to hiring difficulties amongst employers.

Given the movement and labour restrictions implemented to contain the pandemic, labour market conditions have deteriorated further making it harder for graduates entering the job market.

Resolving these issues require long-term structural reforms in the labour market based on a framework which promotes a robust and holistic ecosystem.

Policy should be aimed at providing the basis for creation of high-skilled jobs based on quality investments by the private sector.

Investments which lead to creation of high-value jobs leading to increasing economic complexity should be incentivised.

This needs to be supported by a plan to shift away from a low-cost production model which reduces the reliance on low-cost foreign workers.

Such reforms would expedite the transition to a high-income economy enabling graduates to command higher real wages and remove excesses from the current high-skilled talent pool entering the labour market.

Efforts should also focus on enhancing skills of existing workers which allows reallocation to productive sectors with high-growth potential.

This would involve participation of industry, academia as well as other relevant stakeholders.

At Taylor’s University, this is being pursued via the Taylor’s Curriculum Framework developed from the perspective of the community, global environment as well as employers.

Graduates are trained based on capabilities which are referred to as Taylor’s Graduate Capabilities. Among the capabilities are discipline expertise, critical thinking and problem-solving skills, communication (oral and written) skills as well as digital literacy.

Lack of labour market resilience in Malaysia has been accentuated during the pandemic which would require enhancement of the social security and unemployment insurance.

An overwhelming proportion of self-employed and younger workers were lacking social protection due to lack of employment insurance and sufficient social savings.

Closing these gaps require broadening of coverage as well as enhancement of the reach of social protection infrastructure.

Implementation of impactful policy would act as stabilisers, allowing greater resilience of the labour force in anticipation of future shocks in the economy.

Given that the above needs identified and suggested directions for policy, the 12th Malaysia plan could potentially be aimed as an inflection point for the Malaysian economy given the opportunity presented from the recovery in the post-pandemic era.

It would allow the building of stronger fundamentals for the economy leading to creation of high-skilled and high-paying jobs which is supported by skills enhancement in the supply side.

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* Associate Professor Dr Hafezali Bin Iqbal Hussain is an academic of the Faculty of Business and Law, Taylor’s University.

** The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.