Five years on and the ETP is a mixed bag, says think-tanks

Ong said the mismatch between graduate skill and jobs matching those skills is worrying

Ong said the mismatch between graduate skill and jobs matching those skills is worrying

KUALA LUMPUR, Oct 9: A forum on the labour market and job creation today revealed that the government’s much-heralded Economic Transformation Programme (ETP) has achieved mixed results, some of which have serious and worrying implications for the nation’s economy.

Organised by think-tanks Research for Social Advancement (Refsa) and Penang Institute, the forum sought to reevaluate the ETP in terms of job creation and its impact on the nations’ economy, as well as to launch Penang Institute’s latest report, “Jobs and the Labour Market in Malaysia under the Economic Transformation Programme (ETP) 2011 to 2015.”

Penang Institute in KL general manager Dr Ong Kian Ming, who is one of the panellists, said one of the findings of the report is, while the ETP has created more jobs overall, it failed to create more high-skilled jobs.

“The ETP goal was to create 3.3 million jobs from the 12 National Key Economic Areas (NKEAs), and the labour force has grown from 12.8 million in 2010 to 14.5 million in 2015, so it seems that they have in fact reached two-thirds of their goal,” he said.

However, the creation of jobs must be placed in context of what kinds of jobs are being created. One significant finding was that high-skill employment in 2011 took up 26% share of total jobs, but this figure has stagnated and even fell by 1% in 2015. On the other hand, the share of low-skill jobs in the country rose from 12% in 2011 to 14% in 2015.

“The ETP’s main objective was to triple the composition of high-income jobs in the economy by 2020. The plan predicted that 54% of all new jobs created would match the labour potential of workers possessing tertiary level qualifications i.e. those with diploma or degree qualifications. 

“A majority of new jobs were mid-skilled, which went up from 792,000 in 2006-2010 to 1,030,000 jobs in 2011-2015,” Ong said.

These findings lead into another worrying trend, where there is a mismatch between the number of highly-educated graduates and the number of high-skilled jobs.

“Malaysian workers have become increasingly educated, with the proportion of workers possessing tertiary qualifications rising by 3% between 2011 and 2015, while those possessing secondary or lower qualifications declined,” he said.

However, despite the increase in supply of skilled workers, the overall share of high-skill employment in the economy has decreased over time, leading to higher graduate and youth unemployment figures.

The report found that the youth unemployment rate is three to five times higher than that of the overall unemployment rate, where as of 2015, 365,200 of unemployed were aged below 30.

In contrast to the share of employees with primary level qualifications or without formal education (which declined by almost 5% in 3 years), the percentage of tertiary-educated employees in the informal sector recorded 8.6% of overall share in 2012, rising to 11.8% in 2015.

“This suggests that there may be insufficient jobs in the formal sector for the well-educated cohort such that they have to turn to the informal sector for work. Given that only 5% of the jobs in the informal sector are in high-skill occupational groups, there are likely to be issues of underemployment as well,” Ong pointed out.

This then leads to a workforce that is young, but vulnerable and with no formal job security.

Furthermore, a continued reliance on cheap foreign labour continues to suppress wages, forcing wages to remain low and leading to a case of supply far outstripping demand.

One example, said Ong, is in the number of applicants for low-level civil service jobs.

In 2015, there were over 1.6 million applications for only around 30,000 positions in the civil service, or 1.9% of applications. For a position of a PMR-level general assistant, there were over 78,000 applications for just 16 positions, or a 0.02% success rate.

“Put it this way: It is harder to enter the civil service than it is to enter Harvard,” Ong said.

What this shows, however, is that there is an incredible wage pressure on the vulnerable groups, and that there are steps that need to be taken in order to transform the labour market.

The first of these is to reduce reliance on cheap foreign labour, Ong said, for this forces wage depression especially on lower-end jobs — the government must increase levies and put in a hard cap on foreign labour, in addition to having more direct intervention on the education system to improve the quality of graduates.

Meanwhile, DAP National Political Education Director Liew Chin Tong said there must be a paradigm shift when the discourse is taking place on the job market.

Liew said there needs to be a virtuous cycle of good jobs and good pay, not vicious cycle of bad jobs and low pay.

Liew said there needs to be a virtuous cycle of good jobs and good pay, not vicious cycle of bad jobs and low pay.

“I want to focus on the the centrality of jobs in economic debate. We often talk about investments, what sorts of projects, and every Budget we talk about projects. But central to an economy are jobs, because without decent jobs you will run out of people who can afford to spend.

“Malaysia has always been an export-orientated economy, and the government was happy to suppress wages and currency in order to stay competitive, but with the global economic crisis, we have been highly dependent on domestic consumption for the last 8 to 9 years. But where is the source of consumption? It is from debt,” Liew said.

Bank Negara recently announced that Malaysia’s household debt-to-gross domestic product (GDP) ratio increased to 89.1% as of 2015 from 86.8%, a worrying figure that places Malaysian household debt as one of the highest in the region.

“Our household debt is a time bomb. We are dependent on a domestic consumption that relies on debt,” he said.

What we need, Liew added, is a virtuous cycle where people paid more, for higher productivity, and skilled labour, not a vicious cycle with less pay, low productivity, and low skill.

Another worrying trend, Liew said, is that from the latest Khazanah Institute Household Income Report, it was reported that one-fifth of income from the bottom 40% came from the government’s Bantuan Rakyat 1Malaysia (BR1M).

“I am not calling for the abolishment of BR1M, I am pointing out that 1/5th of income of the bottom 40-percent is from cash transfer, and this is not good for the economy. This is not the economy we aspire to. We want income to come from proper wages, and proper reward for their work,” he said.

Liew, who is also Kluang MP, said it is time to rethink the need for the government’s Performance Delivery Unit, or Pemandu, which is spearheading the ETP.

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