Saturday, December 6, 2008

Full employment and structural unemployment

It is a theoretical given that since Malaysia has millions of foreign workers, there should be no fear of unemployment. Yet, even in the best of economic times, Malaysia has a 3% rate of unemployment.

Why is this so?

The obvious answer is the phenomenon of structural unemployment. Structural unemployment is regarded as a long-term unemployment phenomenon that arises from imbalances between the skills and other characteristics of workers in the market and the needs of employers.

It involves a mismatch between workers looking for jobs and the vacancies available often despite the number of vacancies being similar to the number of unemployed people.

In this case, the unemployed workers lack the specific skills required for the jobs, or are located in a different geographical region to the vacant jobs. Structural unemployment is usually a result of structural change.

The government can mitigate the problem by providing an infrastructure that offers training in these areas so that the demand for these jobs can be met.

This is where technical colleges and institutes are very important. They have an important economic role to ensure more Malaysian workers can have the opportunity to increase their skills, which in turn increases the supply of labor in skilled areas.

But, how available are these technical colleges? The resources seem to have been poured into building universities. Vocational and tradesman skills seem to have been neglected. Why is this?

Perhaps the Minister of Education and the Minister of Higher Education can explain this. And, while we're at it, can someone please explain again why there needs to be two education portfolios?

In the coming few years, the economic challenges are going to become worse. No, Datuk Seri Najib, I'm not talking Malaysia into a recession. I am addressing a key economic management issue.
Malaysia's economic managers make platitudinous comments about skills training and knowledge capital. We can create as many tertiary graduates as we can. We can create thousand of university graduates every year. But, anyone watching war movies can tell you that it is not the captain or lieutenant that drives the platoon. It is always the experienced sergeant that really holds the troops together.

In the context of the economy, the sergeant is the trained supervisor and floor worker. These people are the real engine of the Malaysian economy. And, we need to address their needs.

And, we need to build more technical colleges and institutes to keep the feeder line of workers so that the SMEs and industrial corporations can keep moving up the value chain in terms of the manufacturing and production.

If the government anticipates unemployment in the coming year, it must surely accelerate plans for more places to re-train these workers to ensure that the phenomenon of structural unemployment is fully addressed. Are they?

Who's in charge of creating technical and vocational colleges and institutes in Malaysia?

Is it the Minister of Education?

Is it the Minister of Higher Education?

Or, is it the Minister of Human Resources?

So many Ministers, so few thinking and forward-planning Ministers.

So much politicking, so little economic planning.

This issue of full employment and structural unemployment is only one aspect. I hope to blog further about related issues such as minimum wages and the abdication of responsibility by Malaysian unions


Anonymous said...

Ya, structural unemployment! Finally!

But then until U mentioned about this jargon, do anyone in the relevant ministries honestly know/care about this phenomenon?

This could explain why the silence & the wrong infrastructural planning in our educational policies.

Why churn out thousands of 'blur-sotong' graduates who need further industrial trainings? This is a blatant waste of people, time & money. Resources that r critical for the well-being & competitiveness of the country!

Instead the direct training of skilled technicians/foremen in the shop floor, who can go straight into the industries, is ignored or been 'maintained' by the private SMI?

Perhaps the 'dinosaur' thinking of degree paper can up-start one's career path better than a qualified tradesmanship certificate is too deeply entrenched in the thinkings of these policy planers.

Or maybe graduates don't do 3D works, paper-pushing in the air-con office fits the policy better!

Here's a little diversion: 1 out of 4 SRJK pupils dropped out of SMK before finishing Form3.

Contrary to 'common' belief, 90% of them ended up in low paying apprenticeship in the private SMI. Over the years many have 'graduated' from this school of hard-knock to become their own bosses.

Low in paper qualifications but full of surviving determination, & yet become the major driving force of our SMI. They also contribute 35 to 36 percent to GDP!

Any more awakening in structural unemployment? Career mismatch?


de minimis said...


It's true that there is always a dropout rate even in the best of times. This is where the dropouts either go into silly anti-social activities or, enter into apprenticeships in workshops and factories.

It would be better to have more technical institutes and colleges to capture these dropouts.

It is a fact that not everyone is into tertiary education. The Malaysian economy must capture these dropouts and give them skills-training and ensure that they are given fair wages.

These dropouts are the engine of the Malaysian economy. They deserve better recognition and support.

Structural unemployment can be minimised and mitigated by the same technical institutes and colleges at a mature-age level.

Icarius said...

Hi all,

Just to add on (with my 1.5 cents worth). I am no economist or any-ists, just another person trying to understand things a bit better.

Like both of you said, it is this technical or vocational schools that produce the supervisory level workers for SMIs.

At the same time, given that we have large numbers of foreign workers, they can (unfortunately for them) also serve as a buffer against downturns (where they can be retrenched without further affecting the local economy too much).

In such times, the supervisory level (the locals) can always step down and do the production work (previously done by the foreign workers) together with the local production workers.

This way, the SMI protects itself by keeping the supervisory levels through a downturn (although perhaps a pay cut may be necessary for survival of all), and have these same supervisory levels ready to train a batch of new foreign production workers when the market picks up.

To do this, we must have 'factories' that produce these supervisory levels and not through the traditional practice of apprenticeship, where a drop-out is taken in by a 'master' and trained through experience.

Apprenticeship is good, but only if the apprentice-to-be is already trained in the basics. Much like the housemanship a doctor must go through.

As for economic downturns, in my view, they are a necessary part of the cycle and are to be expected to happen. I simply cannot see how an economy or any other thing for that matter can have continuous 'growth'. A system without limits simply cannot exists for long.

And yes, foremen, mechanics, technicians, bricklayers, hairdressers are professionals too and should be treated (and paid) as such.