Skills and occupational mismatch in Malaysian labour market
Despite its low unemployment rate, Malaysian labour market is currently sending signals of mismatch: a misallocation between demand and supply in the labour market. The issue of mismatch should not be ignored as it indicates the incapability of economies to employ their existing stock of human ca...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2021
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/99345/1/SALWATY%20BINTI%20JAMALUDIN%20-%20IR.pdf |
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| Summary: | Despite its low unemployment rate, Malaysian labour market is currently sending
signals of mismatch: a misallocation between demand and supply in the labour
market. The issue of mismatch should not be ignored as it indicates the
incapability of economies to employ their existing stock of human capital, and
impeding long-term productivity. Motivated by the above issue, this study
attempts to measure the level of mismatch and its factors. Specifically, the aims
of this study are threefold.
The first objective is to measure skills mismatch and its contribution towards
mismatch unemployment in Malaysia by using annual data 2006-2017 from the
Department of Statistics Malaysia (DOSM), Ministry of Human Resource
Malaysia (MOHR), and Bank Negara Malaysia (BNM). The result reveals that in
2007, the index was only 0.108, while in 2017, it surged up to 0.273, which
indicates there is 27% of hires were lost due to misallocations in the labour
market. Mismatch unemployment has contributed around 50% to the rise of the
unemployment rate. This suggests that the formal education system in Malaysia
is not responsive to the demands of the labour market and vice versa.
The second objective measures occupational mismatch by quantifying the level
of overeducated and undereducated workers in the labour market. It was
measured using both Job Analysis and Realized Matches methods, employing
2010-2015 Labour Force Survey (LFS) data. The analysis suggests
undereducated workers are more prevalent in the labour market. On average,
the level of undereducation was 0.338, which means that 34% of the labour force
were undereducated. However, the proportion of severely overeducated workers
have been rising year by year. Among occupations, technicians and associate
professionals, and clerical support workers are the ones in which there is the
highest proportion of overeducated. Among sectors, agriculture, forestry and
fishery, construction, and administrative and support service activities are the
ones in which there is the highest proportion of mismatch.
The third objective, survey fieldwork was carried out to identify supply-side
factors of mismatch. A total of 402 questionnaires were gathered from a stratified
random sample of unemployed graduates in career fairs. Using the Relative
Importance Index (RII), the findings reveal that in general, job seekers believe
that no jobs are available in the market. This circumstance at least indicates the
disconnection between the demand and supply sides, as information on job
vacancies of the former fails to reach the latter.
This study makes a significant contribution to the study of unemployment in two
ways. First, it proposes new tools to measure the mismatch, specifically skills
mismatch index, mismatch unemployment, and occupational mismatch level in
Malaysia. Although mismatch remains a challenge and a top policy concern,
there has been no systematic mismatch measurement analysis. Another
contribution is that by understanding the reason for unemployment, policy
makers could enhance an active labour market policy to avoid human capital
destruction. |
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