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Opening Remarks by Hisham Hamdan
- 1. The School-to-Work Transition of Young Malaysians Hisham Hamdan Date: 12 December 2018 Venue: Mercu UEM, KL Sentral
- 3. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS 3 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). • 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. GDP Macro Outcomes Ringgit Unemployment Debt Inflation Rate Interest Rates Current Account Balance Fiscal deficit KLCI Index Government Policy Industrial Policy Technology Policy Labour Market Education Policy Energy Policy Bumiputera Policy Agriculture Policy Trade Policy Monetary Policy Housing Policy People Inputs Agri Smallholders Access to healthcare School- Work Transition Socio-economic mobility Decent Jobs Social Protection Affordable Housing Nutrition Care Work
- 4. +THE STATE OF HOUSEHOLDS 2018 • 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 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 Capital Labour Profits Wages GDPY = AF(K,L) Education Training Entrepreneurship
- 5. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS 5 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 • 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. Politics and geopolitics Demography Science and technology Int’l trade Jobs and skills Shelter and cities Food and Agri. Public health Growth Societal Well- Being Research Areas The Context in which We Operate Impact Areas Equitability
- 6. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS 6 Background: Our Journey So Far KRI has published 10 Books, 9 Discussion Papers and various articles since its inception in 2014. • KRI publishes books, discussion papers and articles, aimed at ultimately influencing policy directions, while improving public awareness about crucial policy issues. Books Discussion Papers
- 8. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS 8 The State of Households II SOH II provided a sharp focus on Malaysia’s demographic landscape – particularly gender and ageing • 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. 2016 Households are better off But households becoming increasingly indebted More women have entered workforce Food prices rising faster than overall inflation 0% 20% 40% 60% 80% 100% 1995 2004 2014 Women’s labour force participation rate by age 1995, 2004, and 2014 Low wages and youth unemployment We are becoming an ageing population FOCUS OF SWTS
- 9. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS 29% 30% 31% 32% 33% 34% 65% 66% 67% 68% 69% 70% 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 Working Age (LHS) Dependent Population (RHS) Youth Indonesia 15.4% 0 2 4 6 8 10 12 14 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? Malaysia 15-24 World 15-24 Youth Unemployment (15-24 yrs) Source: DOSM, ILO (2018) % Education ≠ Jobs1 Youth today best educated generation, but face challenges in finding jobs Working Age Population Aging Malaysia2 Source: DOSM (2018) 2018-20 Peak 69.4% Working age population (15-64 yrs) will peak by 2020, and the dependent population (0-14, 65+) will increase thereafter. Without good jobs, how will youths of today support our aging society? • 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. Lower Output3 Malaysia Total Wages Profit GDP Capital Labour Lower Labour Input Lower Output Youth Thailand 3.8% Youth Singapore 5.3% Malaysia Tertiary Enrollment 6% 8% 10% 13% 17% 20% 24% 28% 1982 1987 1992 1997 2002 2007 2012 2017 % of Malaysia’s Labour Force with Tertiary Education Source: DOSM Less Support for Aging Population 9 Youth World 12.6% Youth Malaysia 10.8%
- 10. +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
- 11. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS Number of Participants 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 • 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. Employer The SWTS in Malaysia 1 Direct Input from Youth & Employers Upper Secondary 7,026 Young Job Seeker 5,696 Young Worker 5,871 TOTAL Youth 22,165 TOTAL Employers 1,620 Tertiary Education 3,572 SWTS was conducted from end of 2017 to start of 2018 Provide qualitative & quantitative analysis on… 2 Survey developed by ILO Tested in 34 low/middle-income countries3 Youth Youths’ Aspirations & Behavioral Choices Quality of Transition Individual Profiles determine labour market outcomes Clarify misperceptions of youth labour demand 11
- 12. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS Education Job-seekers Young workers Chapter 2 In-School Youth Chapter 3 Youth in Tertiary Education Chapter 4 Young Job Seekers Chapter 5 Young Workers Employers Chapter 6 Employers Youth Labour Landscape: What we cover Transition from school-to-work is a critical juncture in the life of any young man/woman • 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
- 13. 15 Thank You
- 14. +THE SCHOOL-TO-WORK TRANSITION OF YOUNG MALAYSIANS FOCUS OF SWTS 14 Climbing the Ladder: Socio Economic Mobility in Malaysia Malaysia is mobile ─ One’s starting point is not the most important factor for mobility • 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? Children better educated than parents 19% of children’s income is associated with parents’ income, lower than many developed nations Children better skilled than parents Gender & location key determinants for upward mobility ‘Middle class squeeze’ 2016 Male children more likely to be upward mobile than female Children in urban more likely to be upward mobile than rural Children move down the income ladder and earn less than their parents
- 15. +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? Malaysia Malaysian Labour income share goes against global trends… Source: IMF (2017) 30% 35% 40% 45% 50% 0.30 0.35 0.40 0.45 0.50 Gini Coefficient (LHS) Adjusted Labour Income Share (RHS) Source: DOSM (Various Years), KRI Calculations …leading to a lower Gini 0% 20% 40% 60% 80% 100% %shareoftotal employment Agriculture (12%) Construction (9%) Mining (1%) Manufacturing (17%) Services (61%) Malaysia transitioned towards Services… Sources: KRI (2017) Employment by sector, 1960 – 2015 14 14 41 44 0 10 20 30 40 50 60 2005-2010 2011-2016 But what kind of Services? Modern Private sector services, % of GDP What does this mean? Short term: Malaysia growth more inclusive as rewards to labour rise Long term: Growth less reliant on technology, reducing ability to harness innovation and drive productivity growth • 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 Industrialisation