Bank Negara Malaysia (BNM) has released its Annual Report 2016 yesterday, noting that “ the global youth population has been negatively affected by the deep recession, the ensuing environment of prolonged and shallow economic recovery and lacklustre job growth.”

Following the global financial crisis (GFC), the global youth unemployment rate rose from a pre-crisis rate of 11.7% in 2007 to 13.1% in 2009; and reaching a historic peak of 13.2% in 2013, and is estimated to remain high at 13.1% in 2016.

Youth unemployment rate in Malaysia

As for Malaysia, the youth unemployment rate in the country was estimated to have reached 10.7% in 2015, more than three times higher than the national unemployment rate of 3.1%.

Malaysia is among regional economies with an incidence of youth unemployment in the double-digits, despite a low overall unemployment rate

Chart 1

The report also revealed that youths represented more than 50% of total unemployed workers, despite only making up a third of the labour force.

In 2015, the youth unemployment rate increased by 1.2 percentage points from an estimated 9.5% to 10.7%, while the national unemployment rate increased by only 0.2 percentage points (2.9% to 3.1%) during the same period.

Chart 2

Youth unemployment has been on the rise in the recent period, as the growth in hiring has slowed since late 2014. Cautious business sentiments and moderating economic performance have restrained businesses from expanding their workforce.

The report stated: “They (youth) are likely to be the last to be hired and the first to be made redundant; due to their lack of experience, higher information asymmetry on the labour market, and poor ability to communicate their skills effectively to employers.”

ALSO READ: Malaysian youth worried about robots replacing humans by 2020

Factors contributing to high graduate unemployment

Despite the workforce increasingly becoming more educated, job creation in the Malaysian economy has remained concentrated in the low and mid-skilled jobs, as domestic industries stay in low-value added activities that emphasise cost efficiency and dependence on cheap labour, rather than pursuing innovation as a source of growth.

The Malaysian economy also continues to face the challenge of attracting high-quality investments that would create more high-paying, high skilled jobs for the local workforce. In the meantime, firms point to skills shortage as a key factor which prevents them from making investments to move up the value chain.

This mismatch between the changes in educational attainment of the workforce and the types of jobs created is also manifested to some extent in anaemic demand for fresh graduates, as online job postings for entry-level positions for graduates have remained largely stagnant since 2012.

Chart 3

Charts / Bank Negara Malaysia Photo / 123RF