Youth Unemployment

Ensuring that young people are gainfully employed is generally a major consideration of policy makers regardless of the stage of development of the economy. The term “Youth” used in this indicator covers the segment of the population in the 15 to 24 years age group, while those 25 years and older are considered to be adults. KILM 10 depicts four distinct aspects of youth unemployment: (a) the youth unemployment rate (youth unemployment as a percentage of the youth labour force); (b) the ratio of the youth unemployment rate to the adult unemployment rate; (c) youth unemployment as a proportion of total unemployment; and (d) youth unemployment as a proportion of the youth population. A supplementary indicator, which is useful to have if such information is collected, is a measure of the proportion of the youth population not in employment, education or training, or the “NEET” rate.

The NEET thus accounts for the young people who are either unemployed or not in the workforce all together for reasons other than education or training. KILM 10 can be further disaggregated by gender, by state and by strata.

The data for estimating KILM 10 is captured through the Labour Force Survey conducted periodically by the Department of Statistics Malaysia (DOS) using the household survey methodology.

In today's modern world, young men and women are faced with increasing challenges, elevated expectations and demands foisted upon them by family and the community, as well as great uncertainties as they embark into the next phase of life in search of gainful employment with financial independence. This experience could be sometimes traumatic for certain people, especially when they are burdened by education-related debts or tight family financial situations. Under these circumstances, the prospect of unemployment, or actual unemployment, or even underemployment may compound the anxieties of young people and lead to disillusionment which at worst may contribute to their withdrawal from participation in the economy. Evidence from industrial countries suffering large youth unemployment rates show that the psychological consequences for young people include greater likelihood of feeling ashamed, rejected, lost, anxious, insecure, down and depressed, isolated and unloved. Unemployed youths are likely to have problems with health, friendships and family life compared to those with work or studying. They have less confidence about the future, are more likely to turn to drugs, think that there is nothing to look forward to and sense that their life has no direction. Some long-term unemployed youth reported having suicidal thoughts. These sentiments are sometimes referred to as the 'scarring effects' of youth joblessness.

Youth unemployment has also been shown to have lifelong effects on income and employment stability, because the affected persons start out with weaker early-career credentials, and show lower confidence and resilience in dealing with labour market opportunities and setbacks over the course of their working lives.

Relatively large numbers or increasing amount of unemployment among youth could have particularly negative economic implications. Unemployed youth would not be able to contribute effectively to national economic development, especially in this important stage of economic life when their propensity to consume is the largest. In other words, if youth unemployment rates are unduly high, targeted policies to increase youth employment could have multiplier effects for the economy through the boosting of consumer demand and adding to tax revenue.

Structural economic changes may include shifts from agriculture and low-end manufacturing to other areas of economic growth. Agriculture and also some areas of manufacturing/factory work has traditionally provided many youth with jobs or apprenticeships. But the progressive shift to services and more dynamic cum innovative sub-sectors of manufacturing (see KILM 4: employment by economic sector in Malaysia) with less labour intensive processes have reduced job opportunities for youth overall, especially for those lacking the skills and educational level to transit into the new growth segments. Moreover, within the growing services sector, transformations stemming from rapid innovation in information technology has also reduced the need for low to semi-skilled office clerical and sales personnel, which has had a particularly negative impact for female youth.

Another noteworthy question that needs to be addressed is why unemployed youth cope with the situation much worse than unemployed adults. Everywhere in the world, youth unemployment rates are consistently higher than adult rates and there are some factors unique to young people that shape how the lack of a job is managed. Young people encounter difficulties in the labour market because of lack of work-relevant skills. They also have insufficient knowledge, information and connections on how to acquire the relevant or appropriate skills, especially youth from poor households. In some instances, there is a reputational issue because first-time young workers and their parents perceive that certain jobs or the qualifications identified with training institutions like vocational ones are considered “low” status. They fail to appreciate that these jobs may actually require a high level of skill or that vocational/ specialized training agency offer high skill accredited courses. In some instances, the career prospects and future earning potential may be superior to that of the academic as opposed to that of Technical and Vocational Education and Training (TVET) streams.

Young people searching for a job for the first time most often lack knowledge about what the world of work is actually like, and have insufficient understanding of potential career choices. They may also not possess the credentials that could get them started on an upward path, especially when there are limited opportunities for entry-level work that is career oriented. Employers are often reluctant to invest in training young people when more experienced adult workers are available, thus youth is unable to acquire workplace relevant skills, including on cooperation, communication, critical thinking, creativity, and the needs of the enterprise. Another factor accounting for reluctance by firms in hiring young workers maybe inflexibility in labour market regulations which may be antiquated and not responsive to newer job modules or structures of innovative future new growth areas, which calls for greater flexibility in hiring and laying off staff to reflect changing environments and in setting work hours matrices or workplace arrangements. Thus there may be a need to frequently review labour market policies that maybe inevitable affecting youth job prospects to make sure they continue to be consistent with economic realities which may call for greater agility, mobility and transferability in the workforce and the workplace settings.

In today's modern world, young men and women are faced with increasing challenges, elevated expectations and demands foisted upon them by family and the community, as well as great uncertainties as they embark into the next phase of life in search of gainful employment with financial independence. This experience could be sometimes traumatic for certain people, especially when they are burdened by education-related debts or tight family financial situations. Under these circumstances, the prospect of unemployment, or actual unemployment, or even underemployment may compound the anxieties of young people and lead to disillusionment which at worst may contribute to their withdrawal from participation in the economy. Evidence from industrial countries suffering large youth unemployment rates show that the psychological consequences for young people include greater likelihood of feeling ashamed, rejected, lost, anxious, insecure, down and depressed, isolated and unloved. Unemployed youths are likely to have problems with health, friendships and family life compared to those with work or studying. They have less confidence about the future, are more likely to turn to drugs, think that there is nothing to look forward to and sense that their life has no direction. Some long-term unemployed youth reported having suicidal thoughts. These sentiments are sometimes referred to as the 'scarring effects' of youth joblessness. Youth unemployment has also been shown to have lifelong effects on income and employment stability, because the affected persons start out with weaker early-career credentials, and show lower confidence and resilience in dealing with labour market opportunities and setbacks over the course of their working lives.

Relatively large numbers or increasing amount of unemployment among youth could have particularly negative economic implications. Unemployed youth would not be able to contribute effectively to national economic development, especially in this important stage of economic life when their propensity to consume is the largest. In other words, if youth unemployment rates are unduly high, targeted policies to increase youth employment could have multiplier effects for the economy through the boosting of consumer demand and adding to tax revenue. At the same time, there would be incremental enhancements in social benefits as youth disenchantment leading to potential for disturbances, violence or crime would be reduced and youth as a group would sense the inclusiveness of national policies and feel less vulnerable. Gainful decent work also helps youth to escape poverty, be self-sufficient and eschew social dependency while allowing them to fulfil their aspirations and dreams.

Limitation/ Comparability

As applicable for all KILMs, due consideration must be given when making cross country comparisons of the youth unemployment indicators. Differences would naturally arise from variations in data collection and estimation methods which each country utilizes. For example, the definition of the youth group differs among countries and even within countries different definitions of the youth groupings are utilized for varying purposes. Then there are also issues regarding the definition of unemployment as set out in KILM 9, which may add to differences when comparing country experiences. Most importantly, the timing in the collection of information is critical, as known periods within which people leave school or other learning institutions or the onset of school breaks or vacation time, would have a direct influence on measuring unemployment, which may vary significantly over the year.

Moving forward

For the future, attempts would be made to collect the ratio for NEET to better understand youth unemployment. ILMIA would also work towards further disaggregating the youth unemployed workers by their educational qualifications and fields of studies, analysis of which would be useful for improving the employability of youth, to the extent that such information is available and are sufficiently representative. It may also be useful to look into the factors that account for variations in KILM 10 indicators among states and the federal territories, so that state and federal administrators can better target policies to address youth unemployment. Finally, a benchmarking could be undertaken of the youth unemployment rates among countries in ASEAN and similarly situated economies from other regions.