Is structural unemployment on the horizon for Malaysia?

PETALING JAYA: An economist has warned that the Covid-19 pandemic has exposed the country to the increased risk of structural unemployment.

The persistent pandemic and the country’s push towards digital transformation has left hundreds of thousands of Malaysians without jobs. Meanwhile, many of those who have kept their jobs are forced to take on fewer hours, thus depressing their salaries and suppressing demand for goods and services – which in turn, affects economic growth.

Speaking to FMT, Paolo Casadio of HELP University explained that the country’s sluggish growth will create structural unemployment, which he described as “a new and shocking scenario for Malaysia”.

Structural unemployment occurs when there is a mismatch in the skills that employees have and what employers need, with technological advances and shifting demographics among its underlying factors.

“The 4.75% or 5% of growth in normal times has been essential for Malaysia in all these years to accommodate the increase in the labour force (about 0.5% per year) coming from the growth of the population,” Casadio said.

“Lower growth will thus create a structural imbalance, with an excess supply of workers that cannot find a job, thus becoming unemployed and creating systematic downward pressure on salaries.”

Casadio stressed that this is a “serious problem” that must be solved, noting that in the short term, supporting workers and fiscally incentivising companies to retain their human capital is the “only practical way” to do it.

Apart from boosting investment and improving coordination between agencies, Casadio also called for the government to scale up programmes that help SMEs to grow and incentivise entrepreneurship.

“This should also include short-term reskilling and retraining programmes,” he said.

Warning of the impact of automation and the Fourth Industrial Revolution (IR4.0) on jobs, Casadio also stressed that there should now be a shift to train for jobs that will be in-demand over the next decade or so, and a push to recognise more professional qualifications and certifications – as opposed to just university degrees.

The Human Resources Development Fund (HRDF) is also well aware of the dangers of structural unemployment – which it defines as a skill gap between employers and employees.

In a report last year titled “Post Covid-19 Potential Unemployment and Human Capital Development”, HRDF noted that although its existing mechanisms, processes and experiences can help handle structural unemployment to a certain extent, it “does not have sufficient resources” to address the issue on a larger scale.

“While the current stimulus package may be helpful to mitigate some effects from cyclical unemployment, structural unemployment is a different issue to deal with,” it warned.

“Unfortunately, HRDF, just like Malaysia, is not experienced enough to handle any massive structural unemployment.” — Free Malaysia Today

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