Monday, December 8, 2008

Structural unemployment (Part 2)

etheorist was kind enough to point out to me that one of the key factors that causes structural unemployment is not only a matter of skills training or re-training per se, but, that sometimes economic policies direct resources one way and, graduates are focusing on skills that go another way.

For example, the Malaysian government appear to be fixated on the construction and property development sector as if it is the main driver of Malaysia's future. It cannot have escaped your notice that the economic stimulus package unveiled by the First Minister of Finance was primarily directed at the property development sector.

But, who do the property development sector employ mostly? Foreign construction workers. Sure, there are architects and engineers and building materials suppliers involved. But, is this the best sector to stimulate? Where is the magical multiplier effect in the property development sector?

It appears that the Malaysian economic managers believe that foreigners buying Malaysian properties will offer the panacea. That is why the FIC Guidelines on residential property investment is being relaxed.

I fail to see why our scarce economic resources should be directed at an economic sector that has not demonstrated any major strategic forward planning. Every time there is an economic downturn the property development lobby will lobby the hardest for government rescue, either in the form of financial stimulus, bank borrowing and lending or relaxation of policies.

And, during the good times they carry on building as if there is no tomorrow.

Where is the economic planning and management? Where is the regulation?

In the wake of the Bukit Antarabangsa tragedy will there be any concerted move by the economic managers to deal with the property sector? It shouldn't matter that town planning and building and drainage belongs to the state and municipal authorities. The entire government machinery, from the federal, state and municipal level, needs to act in concert for the sake of the life and limbs of everyone, Malaysian or foreign.

Back to the issue of structural unemployment. The economic managers will do well to ask why graduates are unemployed (leaving aside the other issue, employability).

Could it possibly be that Malaysia's economic resources are directed towards generating economic activities that promote low-cost and not-so-high skills and venues that attract only certain types of FDIs that are only interested in such factors?

I don't know. I'm just wondering aloud.

1 comment:

walla said...

An important observation, de minimis. The focus is still on hardware. In this case, the construction industry which they say affects 124 downline sub-sectors. But those sub-sectors are again hardware, most of which with low value-adds. Their intellectual content, digitized or otherwise, is not very high or valued in export markets.

So it appears the structural unemployment may be attributed to a policy disconnect. Pump-priming construction will only pump funds into few locals while employing many foreigners without any residual benefit to create new capabilities. The projects which can enhance other areas like precision manufacturing and computerized designing have not been forthcoming, or are at best tepid because the original assessments were only predicated on some p-r exercises, not real focus on how to overcome challenges from such blue-ocean greenfields.

Alternatively and concurrently, if we had for instance started a meistership program some thirty years back when the only other player in Asia doing so was Japan, we would probably be in close to the fourth quadrant instead of being in the second quadrant of human capital enhancement that we are currently in.

And that ties in to this: the policy disconnect also pertains to real support where it matters. If one wants potentially the best engineers in the country, places like the double-maths STPM classes of Chung Ling Penang and Sam Tet Ipoh should be supported to the hilt. They are the best feeders into the UM engineering faculties. One suspects many are pulled off by scholarships into Singapore instead. So there's a strong brain drain there. Why the vernacular schools have been neglected, you need to ask some people.

After so many years, they must be blinkered not to have seen their own handiwork. Or still in some state of self-denial.

Readings (& chap6)