Underemployment in Malaysia
Chin Yee Ting1, Beatrice Lim1*, Dayangku Aslinah Abd Rahim1, Rasid Mail1
1 Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah, Kota Kinabalu, Malaysia
*Corresponding Author: [email protected]
Accepted: 15 December 2020 | Published: 28 December 2020
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Abstract: The economic growth in Malaysia post-Independence is partly fuelled by the country’s human capital investment. Investment in education is posited to give positive returns to a country’s productivity, gross domestic product (GDP) and economic growth. The increasing level of educational attainment including Malaysia has produced many tertiary- educated workers. However, these workers risk being underemployed due to the inflexibility of the labour market and the lack of adequate jobs. This study provides an insight into the characteristics and trend of underemployment in Malaysia. This paper utilised secondary data obtained from the Department of Statistics Malaysia (DOSM). In general, females suffer more from underemployment than males. Between 2009 and 2014, rural workforce suffers more than urban areas. However, this pattern has reversed since 2015. The data shows that there is inadequate number of high-skilled jobs in the labour market for the increasingly educated workforce in Malaysia.
Keywords: Underemployment, Time-related Underemployment, Malaysia
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1. Introduction
In the six decades after independence, Malaysia has transformed from an agriculture-based economy to a modern service-based economy. From a low-income country, Malaysia rose to become an upper middle-income country (Economic Planning Unit, 2015). The economic growth in Malaysia is one of the best in South East Asia over the last forty years. One of the key factors driving and sustaining this growth is the country’s human capital development agenda.
Malaysia has invested heavily in human capital. Despite the growing number of high-skilled graduates entering the labour market, the growth of high-skilled jobs is slow. The jobs produced in Malaysia are mainly based on sectors that usually require low and medium-skilled jobs. This results in a mismatch between skills and jobs. Individual with high skills works in low-paid or low-skilled jobs. This phenomenon is known as underemployment.
Underemployment is a growing problem, especially among graduates. Mismatch incidence studies in Malaysia have concentrated on graduates and the primary finding is that between 31% and 35% of graduates take up jobs that do not conform to their respective fields of study (Lim, 2011). The rising disparity in the labour market has been a problem for the nation where the education system does not generates the sort of employees needed by employers.
In general, investment in education is associated with positive effect on productivity, gross domestic product (GDP) and economic growth. In recent years, the number of graduates from higher education institutions has increased worldwide (Scurry & Blenkinskopp, 2011). Similar trend is observed in Malaysia as a result of the reform in higher education in the 1990s (Lim,
2017). An increase in educational attainment among individual is predicted to increase labour force participation. However, limitations in the flexibility of the labour market in providing suitable jobs according to qualification levels and the lack of job opportunities may deter the participation of individuals in the labour market. This results in underutilisation of labour. High level of labour underutilisation or underemployment is a burden as it charges costs on individuals and the economy in terms of loss of output and loss of income.
The International Labour Organisation (ILO) defines “underemployment” as a mismatch between career aspirations, skills, and expectations of a person to his or her actual job.
Underemployment represents the under-use of the labour force’s productive potential. Workers may not only face a total lack of work opportunities, but also lacked adequate work opportunities. This results in situations on which persons in employment are often enforced to use their skills only partially, to earn hourly incomes which are lower or to work less hours than those are willing and able to work (ILO, 1998). Therefore, the risk of underemployment is increasing at which the employment of inferior quality than could be expected given one’s educational level, skills, or experience (Feldman, 1996).
The data from the Labour Force Survey in Malaysia indicates that only 2.2% of employed persons worked for 30 hours or less in 2019 (Department of Statistics Malaysia 2019). Thirty hours a week is considered the threshold for partial employment. It is reported that out of the 338,000 people working 30 hours or less, 70% said they were doing so because of insufficient work or the nature of the job. The data on job mismatch in Malaysia is limited to date. This paper aims to provide a background into underemployment in Malaysia.
This paper aims to provide an overview of underemployment in Malaysia. Following this Introduction, Section 2 discusses the definition and concept of underemployment. The determinants of underemployment are briefly reviewed. Section 3 describes the source of data used in this paper. The final section presents key statistics on underemployment in Malaysia and concludes.
2. Literature Review
Underemployment is a complex concept arising from different perspectives. Ross (1985), Bosworth and Westaway (1987), Bregger and Haugen (1995), Mitchell and Carlson (2001) and Denniss (2003) opined that it is widely acknowledged that the unemployment rate is underestimated when labour is “underutilised”. In general, underemployment can be defined as a situation when the individual’s skills, education, or availability to work is not utilised.
Human Capital Theory
According to the human capital theory proposed by Becker (1962), education, skills, and human capital characteristics may explain certain labour market outcomes, which includes underemployment. Human capital embodies the knowledge, skills, health, and values that contribute to making people productive. Individuals vary the amount of labour supply and effort applied at work to achieve the desired wealth, health and income. Lifetime earnings is affected by career choices and human capital investment in education. Most theoretical views on Becker’s model draws on schooling and training which makes people more productive. In general, the acquisition of more skills will increase productivity and earnings in the future.
Individuals with higher ability is predicted to enjoy higher returns to education. As a result, they have a stronger incentive to invest in human capital. In the case where underemployment occurs, the human capital of individual is not fully utilised.
Determinants of Underemployment
Next, the determinants of underemployment will be discussed to provide more insights into this issue. Many studies have proven that an individual’s education, age, experience, gender, and marital status are significant indicators of underemployment (Leppel & Clain, 1988;
Altonji & Paxson, 1988; Koeber & Wright, 2001; Micheal et al., 2009).
Time-related and skill-related underemployment is higher in females than males (Campbell, Parkinson, & Wood, 2013: Islam & Kamarudin, 2017; Li, Duncan, & Miranti, 2015;
Niyimbanira, 2016; Wilkins, 2004). Further, Niyimbanira (2016) observes that younger people are less likely to be underemployed when compared to older people. Females with children aged less than 15 have a higher probability of underemployment due to the parenting responsibilities for younger children (Wilkins, 2003). Medina (2015) notes that female graduates are more likely than male graduates to have a career mismatch. Daiga and Helen (2017) also found that the probability of underemployment is increasing faster among women than men for the labour market in the United Kingdom.
According to Wilkins (2006), the probabilities of underemployment for males is lower with education level beyond high school. Niyimbanira (2016) states that people who have completed at least primary school are less likely to be underemployed than those with no formal education.
The attainment of education is important as higher education level reduces the risk of underemployment. Mathebula (2013) finds that individual with lower level of educational attainment such as primary education is more likely to be underemployed. Kanwal, Ahmed, Hafeez and Qamri (2020) found that the probability of being voluntarily underemployed decreases in Pakistan. With the increase in the educational qualification of the worker, the chance of being underemployed reduces. This contrasts with Pratomo (2015), where workers with higher level of education, including senior high school and university have higher risk of underemployment. In addition, the more vulnerable group of labour force including women, youth, minorities, elderly and individuals with lower level of educational attainment are impressionable to underemployment (Jensen and Slack, 2003).
Kurre (2000) states that the cost of living is lower in rural areas, therefore, they can generate enough incomes to not regard themselves as underemployed. In many cities, rapid urbanisation and the systemic transition from agriculture to manufacturing or the modern sector resulted in a decrease of underemployment in rural areas (Dhanani, 2004). In contrast, other studies find that rates of underemployment are higher in rural areas (Sackey & Osei, 2006). Bucheal and Battu (2003) note that married women, especially those living in rural areas, faced a high risk of over-education. Findeis et. al (2009) states that rural underemployment rates are high when the population has higher level of schooling. According to Kanwal, Ahmed, Hafeez and Qamri (2020), people living in rural areas have the higher tendency to be voluntarily underemployed because of the law of child labour is not fully implemented and job contracts are seasonal.
Wooden (1993) and Wilkins (2003) find that a single person is more likely to be underemployed. Married, separated, and divorced workers are less likely than non-married workers to be underemployed (Micheal, Cristina & Samuel, 2009; Niyimbanira, 2016). The studies found that married workers are more likely to fit well with their job while unmarried workers are more likely to think that they are more qualified for a better job. Married workers are also less active in searching for better job opportunities than non-married workers. This may be due to the limited mobility of married women or the need to care for their families causes women to opt for jobs which are more flexible but pay lower. According to Sukanya and Patcharawalai (2019), marital status is significantly related with time-related
underemployment. Divorced or separated persons who live with child and married person who live with a child are less likely to be time-related underemployed compared to those single persons. Married workers are more likely to be voluntarily underemployed due to their household responsibilities (Kanwal, Ahmed, Hafeez and Qamri, 2020). The risk of underemployment varies according to age, gender, education, marital status, and residency areas.
3. Source of Data
The data used in this analysis is secondary data sourced from the Labour Force Survey (LFS) administered by the Department of Statistics Malaysia (DOSM). The data can be accessed from the DOSM’s official website. The LFS is conducted monthly by the DOSM, using a household method to collect data on jobs and unemployment structures. The data used in this study includes:
a. the share of employment by skill levels,
b. the number of high-skill jobs with respect to the number of people in the workforce with tertiary education,
c. the total labour force working less than 30 hours per week by gender, and d. the total labour force working less than 30 hours per week by residency area.
DOSM measures time-related underemployment as the number of workforces working less than 30 hours a week during the reference week. In this research, the definition used by DOSM is adopted to provide an overview of the trend of underemployment in Malaysia.
4. Discussion and Conclusion
An efficient labour market can draw investment and give labour opportunities. In such market, there is a perfect match between individuals and jobs. In the case of Malaysia, the majority of jobs in the labour market is mid-skilled jobs. Figure 1 shows share of employment according to job categories in Malaysia between 2001 and 2015. It indicates the percentage of total jobs for low-skilled, mid-skilled, and high-skilled by skills levels. The share of employment for low-skilled, mid-skilled and high-skilled jobs is 10.6%, 65% and 24.3%, respectively in 2001, and 13.8%, 60.7% and 25.5%, respectively in 2015. It shows that the rate of creation for low- skilled jobs in the Malaysian economy is faster than high-skilled jobs. In the meantime, there is a decrease in the proportion of mid-skilled jobs in the market.
Figure 1: Share of employment by skills levels, 2001 to 2015 Source: Department of Statistics Malaysia
The rate of growth in high-skilled jobs is outpaced by the rate of increase of increase in the number of tertiary-educated workforce. Figure 2 shows the total number of high-skilled jobs created from 2001 to 2015 and the total number of workers with tertiary education. The total workforce with tertiary education shows an upward trend from 2000 to 2015. Although the number of high-skilled jobs increased steadily from 2000, the growth slowed down in 2012.
From 2012 onwards, there is inadequate numbers of high-skilled jobs available for the graduates. This implies that there are potential underemployment as young workers may not be able to get jobs that match their qualifications and aspirations.
Figure 2: The number of high-skill jobs with respect to the number of people in the workforce with tertiary education, 2000 to 2015
Source: Department of Statistics Malaysia
10.6% 13.8%
65.0% 60.7%
24.3% 25.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Percentage
Year
High-skill Mid-skill Low-skill
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total workforce (millions)
Year
High-Skill Jobs Workforce with Tertiary Education
The line graph in Figure 3 shows the total labour force who work less than 30 hours in Malaysia from 2009 to 2018. In 2013, Malaysia hits the highest amount of underemployment at 645.8 thousand in the workforce. This comprises of 299,700 males and 346,100 females. The number of the total labour force that works less than 30 hours increased sharply from 2012 to 2013.
From 2012 onwards, the number of female workforces who work less than 30 hours per week is higher than the number of male workforces. This phenomenon shows that female workforces are suffering more on underemployment than male workforces. Although the number of underemployments declines from the year 2015 to 2017, the number of underemployed persons rises in 2018.
Figure 3: Total labour force working less than 30 hours per week by gender, 2009 to 2018 Source: Department of Statistics Malaysia
Figure 4 shows the total labour force who work less than 30 hours per week in Malaysia based on residency areas from 2009 to 2018. The total labour force with less than 30 hours work per week decreases significantly from 2015. The total number of underemployed persons is higher in the rural areas than the urban areas before 2014. While the workforce in the rural areas are suffering more from underemployment than their counterparts in the urban areas, this trend is reversed from 2015 onwards.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total 478.7 503 520.6 589.3 645.8 534.8 580.3 502.8 413.5 437.5
Male 249.4 260.3 267.1 280.9 299.7 209.6 243.9 215.2 172.9 210.2
Female 229.3 242.7 253.4 308.4 346.1 325.2 336.4 287.7 240.6 283.7
0 100 200 300 400 500 600 700
Total labour force ('000)
Year
Total Male Female
Figure 4: Total labour force working less than 30 hours based on residency areas, 2009 to 2018 Source: Department of Statistics Malaysia
The rate of growth in high-skilled employment does not keep up with the rate of growth of the rising tertiary-educated workforces in Malaysia. In the labour market, female workers suffer more from underemployment than male workers. This result is consistent with past research of Medina (2015), Niyimbanira (2016) and Daiga and Helen (2017). In addition, rural workforces suffer more than urban areas. However, this pattern has reversed since 2015. This is consistent with Kurre (2000) and Dhanani (2004) who emphasise that underemployment in the rural areas is lower due to low living cost, urbanization, and structural transformation.
5. Conclusion
Underemployment is a transition process between a learning environment and the realities of the employment market. While it is normal to be underemployed and unemployed, prolonged condition and the difference of underemployment between education, gender and residency areas may intensify income inequality. The identification of the determinants of underemployment and its interaction of cause and effect among individuals in Malaysia will provide insights to the government on how to fully utilise the capacities of the increasingly educated workforce in Malaysia. For example, when there are limited job opportunities in the labour market, a possible alternative worth considering is self-employment. The optimal utilisation of trained human resources may sustain the country’s economic growth. The role of policymakers is important in developing and implementing employment policies to address underemployment issues in Malaysia.
Acknowledgement
This research was supported by Skim Penyelidikan Bidang Keutamaan (SBK0402-2018), Universiti Malaysia Sabah.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total 478.1 503 520.6 589.3 645.8 534.8 580.3 502.8 413.5 437.5 Urban 182.2 202.4 224.5 219.1 286.3 263.6 332.7 307.4 245.2 285.4 Rural 296.5 300.6 296.1 370.3 359.5 271.2 247.6 195.5 168.3 208.5
0 100 200 300 400 500 600 700
Total labour force ('000)
Year
Total Urban Rural
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