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Experts: Fresh grads pay as low as RM1, 000 a systemic problem, cant just blame Covid-19 pandemic

KUALA LUMPUR, April 15 Low earnings for Malaysian fresh graduates was a long-standing issue due to the lack of skilled and high-paying jobs in the country and not caused entirely by the Covid-19 pandemic, said analysts. They disagreed with the governments assertion that the growing proportion of graduates in the bottom RM1, 001 to RM1, 500 pay tier was solely a result of the economic disruptions that accompanied the pandemic. The Ministry of Higher Educations annual survey data as compiled by Malay Mail shows that a minimum of 10 per cent of fresh graduates with degrees have been earning between RM1,001 to RM1,500 for at least the past 10 years. In 2020, the proportion of Malaysian graduates with degrees earning in the bracket hit a decade-high of 22.3 per cent. This was also the year when it became the biggest category, compared to other years including 2019 when the biggest category was RM2, 001 to RM2, 500 at 18.7 per cent. Source: Ministry of Higher Education *Ranges of 2018 data is not aligned with data from other years and have been excluded

Heres what researchers told Malay Mail on why a higher number of Malaysian graduates are earning such low monthly income, and how it could be improved:

Seniority disadvantages young workers

Calvin Cheng, analyst in the economics programme at the Institute of Strategic & International Studies (Isis) Malaysia, agreed the rise in Malaysian graduates earning in the lowest bracket is likely largely cyclical or transitory and linked to reduction in work hours and economic shocks from the Covid-19 pandemic. However, while this effect may be mostly transitory, the whole reason why young workers tend to be most affected by the crisis in the first place is due to underlying inequalities, he said. Explaining why the passing impact of the Covid-19 crisis was more severe for younger workers, Cheng said this was due to deep-rooted structures that inevitably accorded more job protections with seniority. For one, young workers in general are usually the first ones to be let go (or face reduction in hours) during a downturn and the last ones to be employed when conditions improve (last in, first out). Also, young workers are far more likely to be in precarious jobs and persistently face higher rates of unemployment vs. older workers, he said. In the Department of Statistics Malaysias (DOSM) Labour Force Survey Report for the fourth quarter of 2020, the unemployment rate for 15- to 25-year-olds was 12.7 per cent or over two-and-half times the national average of 4.8 per cent. Narratives that push views that Malaysian graduates need to be grateful or should not be picky or narratives that seek to blame negative labour market effects on workers themselves obscure both the seriously unequal and devastating impacts of the Covid crisis on youth as well as the larger structural context, Cheng added.

Underemployed: Lower pay from fewer hours

Khazanah Research Institutes (KRI) research associate Mohd Amirul Rafiq Abu Rahim also agreed that Covid19 was partly why the biggest income group for graduates with degrees fell from the RM2,001 to RM2,500 bracket in 2019 (18.7 per cent) to RM1,001 to RM1,500 tier in 2020 (22.3 per cent). However, he argued that this was exacerbated due to other structural issues such as youth underemployment in 2020, citing a recent KRI study based on DOSM data that found that 5.8 per cent of workers between the ages of 15 and 24 were underemployed by the end of 2020. At a minimum wage of RM1,200 per month or RM5.77 per hour, an underemployed worker who worked 30 hours per week could earn about RM173.10 per week or RM692.40 per month. It could be that the lower wages figure in 2020 is associated with the higher incidence of underemployment among the younger workers, said Amirul Rafiq. Noting that the KRI study attributed this trend to the restrictions on business activities during the movement control order (MCO) in the first half of 2020, Amirul Rafiq noted that more young workers remain underemployed even after the MCO was relaxed, as compared to older workers who were reabsorbed into full-time employment at a higher rate. DOSM defines time-related underemployment as those who were employed for under 30 hours per week due to the nature of their work or because of insufficient work, and were able and willing to accept additional hours of work. In other words, they are involuntarily given only fewer than 30 hours of work per week, when they are actually able to work more hours if required or given the opportunity to do so.

Cheng said his research suggested young graduates, mainly diploma or degree holders, also faced higher risk of underemployment, such as a reduction in working hours, compared to older workers. My estimates using recent labour force survey data suggest that the number of young workers, aged 15 to 24, who are working less than 30 hours a week has increased by a whopping 186 per cent from 2019 to 2020, he said. Cheng said his estimates of quarterly labour force data in Malaysia indicate that the quarterly average of young workers aged 15 to 24 working fewer than 30 hours per week was 126,800 people in 2020 versus a quarterly average of 44,350 in 2019, or nearly three times higher. As for time-related underemployment, Cheng said his same estimates indicate that there was a similar increase in terms of percentage (185 per cent) for the quarterly average of young workers aged 15 to 24 in time-related underemployment in 2020 (378,200 workers) as compared to in 2019 (132,900), which represents an increase of 245,300 workers in quarterly average between those two years.

Graduates > Skilled jobs

Amirul Rafiq said the problem was systemic as most firms in Malaysia did not rely on skilled labour, which meant there was a shortage of skilled work compared to the number of graduates in or entering the job market. While there are jobs with higher value-added and higher wages per worker such as in professional services and ICT, he said these sectors only employ about seven per cent of the workforce and tend to be concentrated in richer states such as Selangor, Kuala Lumpur and Putrajaya. A third of jobs in Malaysia are focused in the service sector that typically do not have high value-added and wages per worker, with jobs in wholesale and retail, accommodation and food and beverage, as well as 5 administrative and support services having wage levels of between RM2,081 and RM2,363 only, as compared to national levels of RM3,224. Amirul Rafiq said these economic activities tend to disproportionately employ younger workers, which meant they are more exposed to employment in lower-wage economic activities, further noting that such data indicates that Malaysias economic activities are labour-intensive and skewed towards low and semi-skilled workers. Again, this is also reflected in our SWTS study, where 95 per cent of our young respondents with unskilled jobs and 50 per cent of those with low-skilled manual jobs were found to be over-educated, he said, referring to KRIs 2018 study on a School-to-Work Transition Survey of young Malaysians. The human resources minister recently said that the Social Security Organisations (Socso) Employment Insurance System (EIS) data showed that 52.8 per cent and 62.5 per cent of workers hired in the third and fourth quarter of 2020 received wages in the RM1,200 to RM1,499 category, due to reasons such as jobseekers opting to temporarily take up non-graduate jobs rather than remain unemployed amid a shortage of vacancies for graduate jobs.

1.Introduction / Main points

2. Body of the report:

i. Restatement of your ideas

ii. Opinions

iii. Support of opinions

3. Conclusion.