The School-to-Work Transition of

Young Malaysians
Hisham Hamdan

Date: 12 December 2018

Venue: Mercu UEM, KL Sentral
 Background

Khazanah Research Institute

 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Background: From Inputs to Outcomes

Macro outcomes impact and are impacted by inputs from government policy. Similarly,
Government policy both impacts and is impacted by Labour inputs (People).

GDP Current Account KLCI Index

Unemployment
Macro Balance
Outcomes Inflation Interest Ringgit Fiscal
Rate Rates deficit Debt

Industrial Bumiputera Labour

Technology Policy
Policy Market
Trade Policy Housing
Government Policy
Agriculture
Policy
Monetary Energy Education
Policy Policy Policy Policy Policy

Nutrition Social
Affordable Care Work
Housing Protection
Decent Jobs
People Inputs School-
Socio-economic Work Agri Access to
mobility Transition Smallholders healthcare

• Quality of economic growth ultimately depends on quality of inputs.

• KRI’s mission is to undertake research on issues affecting the quality of life – and
therefore productivity – of people. The research seeks to influence policies with the
objective of achieving development outcomes beneficial to all Malaysians. 3
 +THE STATE OF HOUSEHOLDS 2018

Background: The Economic Machine

The economic machine takes Capital and Labour as inputs to produce GDP; Labour
Quality matters to increase Productivity & Wages

How the Economy Works

Profits

Capital

Education
Y = AF(K,L)
GDP
Training Labour
Wages
Entrepreneurship

• The economy combines labour and capital to produce output. In return, labour gets
wages and capital gets profits.
• Increasing wages requires increasing productivity. Increasing productivity requires
increasing labour quality. How do we improve the quality of labour? 4
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Background: KRI’s 5 Focus Areas

Amidst the context of Demography, Science & Tech, and Politics & Geopolitics, KRI
undertakes research in 5 areas impacting Growth, Equitability, and Societal Well-Being

The Context in which We Operate

Research Areas Impact Areas

Growth
Societal
Well-
Being
Politics and Int’l Food Science and
geopolitics trade and technology
Agri.

Equitability
Shelter Jobs
and and
cities skills Public
health

Demography

• KRI investigates issues that impact Growth, Equitability, and Societal Well-Being within
the contexts of Demography, Science & Technology, and Politics & Geopolitics.
• Using the lenses of Shelter & Cities, Jobs & Skills, Food & Agriculture, International Trade
and Public Health, KRI forms policy insights relevant to Malaysia. 5
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Background: Our Journey So Far

KRI has published 10 Books, 9 Discussion Papers and various articles since its
inception in 2014.

Books

Discussion Papers

• KRI publishes books, discussion papers and articles, aimed at ultimately influencing
policy directions, while improving public awareness about crucial policy issues.
6
 What inspired the SWTS?

Khazanah Research Institute

 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

The State of Households II

SOH II provided a sharp focus on Malaysia’s demographic landscape –
particularly gender and ageing 2016

Households are But households becoming Low wages and youth

better off increasingly indebted unemployment

More women have Food prices rising faster We are becoming an

entered workforce than overall inflation ageing population
Women’s labour force participation rate
by age 1995, 2004, and 2014
100%
80% 2014
60%
40% 1995
20% 2004
0%

FOCUS OF SWTS
• SOH II highlighted several labour market issues, which touched on the difficulties for
Malaysian youth in finding decent work. The SWTS project was born out of this
research from the SOH II.
8
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Why does School-to-Work Transition matter?

Malaysia will have an aging population post 2020; if the youths of the present cannot
get good jobs, how will they generate the GDP required to support our aging society?

1 Education ≠ Jobs 2 Aging Malaysia 3 Lower Output

Youth Unemployment (15-24 yrs)
Working Age Population
Youth Indonesia 15.4%
14 % Profit
World 15-24 Youth World 12.6% Working Age (LHS)
12
Youth Malaysia 10.8% 70% Dependent Population (RHS) 34%
10
Malaysia Capital
8
15-24 Youth Singapore 5.3% 69% 33%
6
Youth Thailand 3.8% GDP
4 68% 32%
2 Malaysia Total Source: DOSM, ILO (2018) Labour
67% 31%
0
66% 2018-20 Peak 30%
69.4% Wages
65% 29%
Malaysia Tertiary Enrollment
2010
2013
2016
2019
2022
2025
2028
2031
2034
2037
2040
% of Malaysia’s Labour Force with
Tertiary Education Source: DOSM (2018) Lower Labour Input
28% Working age population (15-64 yrs)
17% 20% 24%
8% 10% 13%
will peak by 2020, and the dependent
6%
population (0-14, 65+) will increase
Lower Output
1982 1987 1992 1997 2002 2007 2012 2017 thereafter. Without good jobs, how will
Source: DOSM youths of today support our aging Less Support for
Youth today best educated generation, society? Aging Population
but face challenges in finding jobs

• Youth today are more educated than ever, but still face increasing unemployment.
• An aging Malaysia means that it is crucial to equip youth with skills for future growth &
productivity. Lower labour quality today means lower output tomorrow, making it
difficult to support an aging society. 9
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Common Perceptions among Employers

How true are these Perceptions?

• Unemployed youth in Malaysia are typically perceived as ‘too choosy’, have unrealistic
expectations or do not have the skills desired by employers.
• But how much of these common notions are grounded in reality? 10
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Why the SWTS methodology?

This SWTS is the first ever in Malaysia, and has been adapted to the Malaysian
context, providing direct input from youths who typically are not given a voice
The SWTS in Malaysia Direct Input from Youth & Employers
1 Number of Participants Provide qualitative & quantitative
analysis on…
Upper Secondary 7,026

Tertiary Education 3,572 Youths’ Aspirations &

Behavioral Choices
Young Job Seeker 5,696
Quality of Transition
Young Worker 5,871
Youth Individual Profiles determine
TOTAL Youth 22,165
labour market outcomes
TOTAL Employers 1,620

SWTS was conducted from end of

2 2017 to start of 2018
Clarify misperceptions of
youth labour demand
Survey developed by ILO
3 Tested in 34 low/middle-income countries Employer

• This report is the result of conducting the first ever SWTS in Malaysia.
• SWTS provides direct inputs from youths on youth profiles, transition experience &
aspirations. SWTS also sheds light on skills mismatches & popular myths in the youth
labour market. 11
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Youth Labour Landscape: What we cover

Transition from school-to-work is a critical juncture in the life of any young man/woman

Education Job-seekers Young workers Employers

Chapter 2 Chapter 4 Chapter 5 Chapter 6

In-School Youth Young Job Young Workers Employers
Seekers
Chapter 3
Youth in Tertiary
Education

• SWTS analyses the issues & provides policy recommendations for each stage of a
youth’s experience with transition from school to workforce.
• Each stage is equally crucial as it feeds into the next. The necessary support &
resources must be provided throughout the whole process to improve quality of transition. 12
Thank You

15
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Climbing the Ladder:

Socio Economic Mobility in Malaysia
Malaysia is mobile ─ One’s starting point is not the most important factor for mobility 2016
Children better educated Gender & location key
than parents Children better skilled determinants for upward
than parents mobility

Male children more Children in urban more

likely to be upward likely to be upward
FOCUS OF SWTS mobile than female mobile than rural

‘Middle class squeeze’

19% of children’s income is associated with parents’
income, lower than many developed nations

Children move down the income

ladder and earn less than their parents

• KRI’s Socio Economic Mobility Study in 2015 provided a measure of how Malaysian
families have fared in the face of growth and structural transformation.
• Improvements in children education levels relative to parents form an important part of
the SWTS research – Why do better-educated children face poorer job prospects? 14
 +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS

Part 1: State of Households

Households are stretched, particularly the low-income households. On the other hand,
at the Macroeconomic level, Malaysia’s labour share of income is rising. Why is this?
Malaysian Labour income share goes against global trends… …leading to a lower Gini
Malaysia 0.50 Gini Coefficient 50%
(LHS)
0.45 45%

0.40 40%

0.35 Adjusted Labour 35%

Income Share (RHS)
0.30 30%

Source: IMF (2017) Source: DOSM (Various Years), KRI Calculations

Malaysia transitioned towards Services… But what kind of Services? What does this mean?
Employment by sector, 1960 – 2015
100% 60 Private sector services, % of GDP Short term: Malaysia growth
% share of total

80% Industrialisation Services (61%) 50 more inclusive as rewards to

employment

60% 40 labour rise

Construction (9%) 41 44
30
40% Mining (1%)
Manufacturing (17%)
20 Long term: Growth less
20%
10 14 reliant on technology, reducing
0%
Agriculture (12%) Modern 14
0 ability to harness innovation
2005-2010 2011-2016 and drive productivity growth
Sources: KRI (2017)

• Malaysia has bucked global trends, with a large increase in labour income share from
1991-2014. This has helped to reduce inequality in Malaysia.
• However, this has come due to an economic structure that prioritises traditional
services rather than high-tech sectors. Continuing on this path threatens future growth. 15