Youth Unemployment and Joblessness

Youth Unemployment and Joblessness
by
SAMIRUL ARIFF OTHMAN
Senior Research Officer
Malaysian Institute of Economic Research (MIER)1
“Young people ought not to be idle. It is very bad for them,” said Margaret
Thatcher in 1984. However official figures from the International Labour
Organization, World Bank and the Organisation for Economic Co-operation
and Development (OECD) all suggest that a quarter of the planet’s youth are
neither working nor studying.
The acronym NEET was first used in the United Kingdom, a NEET is a young
person who is "Not in Education, Employment, or Training". A variety of
causes have been attributed to youth unemployment. Firstly, the long
slowdown in the West has reduced the demand for labour, and it is easier to
postpone hiring young people than it is to fire older workers. Secondly, the
existence of dysfunctional labour markets or inflexible labour market and
regulations, that creates a situation of assistance and dependency. Finally,
the quality and relevance of education, which is associated with the
phenomenon of graduate glut.
Youth unemployment, a contentious issue in contemporary Malaysia, was
brought into the spotlight. A feature article in Bank Negara’s 2016 Annual
Report 2016, drew attention to labour market developments and policy
concerns.
Contemporary Malaysian Scenario
From 2014 to 2015, the unemployment rate of Malaysia’s youth (aged 15-24)
rose from 9.5% to 10.7%, by a greater margin than the concurrent change in
the national unemployment rate, which rose up from 2.9% to 3.1%. The
Report’s observation that youth unemployment is three times that of the
national rate. However, it is noteworthy that the ratio generally holds through
the past decade and a half. From 2001 to 2010, youth unemployment hovered
around 11% while the national rate was close to 4%; from 2011-2014, both
maintained lower levels of about 10% and 3%, respectively.
Putting things into perspective, young adults are more likely to be looking for
work because they have just graduated from a learning institution and entered
the labour market, or because they are changing jobs and being more mobile
at the early stages of their work life. Therefore there is a tendency for youth
unemployment to be higher.

Whether or not the trend in Malaysia’s youth unemployment rate continues to
be on the rise this year, it is crucial to consider the structural barriers when
resolving the problem. The Bank Negara report points out to both demand
and supply issues of labour. On the demand side, the profile of new jobs
offers is not in sync (does not match) with that of new job seekers. Between
2001 and 2015, 20 percent of jobs created were classified as high skilled,
52% as middle skill, and 28% low-skilled, although half of the increase in the
labour force comprised of tertiary educated workers, and the other half had
secondary level schooling. Growth of job listings on a major online job portal
increased more for managers and executives than the offerings to fresh
graduates. Correspondingly, wages for entry-level jobs of degree and diploma
holders have stagnated.
On the supply side, some unemployment patterns among the young are
cause for concern, with particular reference to employability of graduates and
skills deficiency or mismatch. Tertiary educated youth register higher
unemployment (15.3%) than non-tertiary educated youth (9.8%). This pattern
is true in many Southeast Asian countries, including Singapore, Indonesia,
Thailand and the Philippines, but the converse occurs in most advanced
economies, such as Germany, Japan, the UK and France, where tertiary
educated youth are less likely to be unemployed.
The report’s recommendations mostly reiterate or call for expansion of various
policies already in place.
Global Political Economic perspective
Looking at this issue from a Global Political Economic perspective, the recent
rise of political unrest and anti-social behaviour in the world has been
attributed to youth unemployment.
During the course of 2010/2011 it became a key factor in fuelling protests in
the Arab World, and by the end of 2011, four regimes (Tunisia, Egypt, Libya,
Yemen) fell in the wake of the protests led by young people.
Around the same time riots and protests broke out in a number of European
and North American cities. This demonstrates that the lack of productive
engagement of young people in society contributes to feeling of
disenfranchisement.
Youth unemployment is also linked to emigration. Young people leave their
countries in hope to find employment elsewhere. This brain drain has
contributed to deteriorating countries' competitiveness, especially in certain
European countries.
The current global environment exposes whatever weaknesses there are in
our economic structure and makes it even more pressing for these
weaknesses to be addressed and the production structure enhanced. In the
final analysis, unmistakably youth unemployment has turned out to be a
macroeconomic concern.

1 The views and opinions expressed herein are those of the author and do not
necessarily reflect the views of MIER.