Salaries fall for Malaysian fresh graduates amid labour mismatch

Salaries fall for Malaysian fresh graduates amid labour mismatch

Malaysia graduates job fair generic
Malaysian youths participating in a job fair. (File photo: Bernama)

KUALA LUMPUR: Salaries for Malaysia’s fresh graduates are on the decline, mainly due to insufficient high-skilled jobs being created, according to an annual report published by the country’s central bank on Wednesday (Mar 27).

There was better news, however, for those without tertiary education, as the implementation of a minimum wage gave a boost to their earnings and allowed them to catch up with their peers.

In the report, it was noted that the proportion of graduates in the labour force increased from 23.5 per cent in 2010 to 28.3 per cent in 2017.

However, after adjusting for inflation, the real starting monthly salaries for most fresh graduates have declined since 2010, said the central bank.

A fresh graduate with a diploma earned a real salary of RM1,376 (US$337) in 2018, a drop from RM1,458 in 2010. Meanwhile, a masters degree holder earned a real salary of RM2,707 in 2018, also a decline from RM2,923 in 2010.

“Evidence suggests that the lack of high-skilled job creation could have played an integral role in this,” said the report.

A study by Khazanah Research Institute also showed that 95 per cent of young workers in unskilled jobs and 50 per cent of those working in low-skilled jobs were actually over-qualified.

“Despite obtaining a high level of education, employees had to settle for jobs that typically do not require such education levels,” said the central bank.

“Consequently, with an ample supply of graduates and limited demand for them by firms, graduate salaries have faced downward pressures.”

In order to create more high-skilled jobs, the report said it is “vital to attract new quality investments from both foreign and domestic firms, pivoting away from the low-cost business model”, among other suggested measures.

NARROWING GAP BETWEEN GRADUATES AND NON-GRADUATES

For lower-skilled workers, the implementation of a minimum wage has supported increases in their earnings in recent years. This has allowed their starting salaries to catch up with those who have higher education qualifications.

The real starting salaries of those who finished Secondary Three and Secondary Five have grown by 4.6 per cent and 2.3 per cent respectively between 2010 and 2018.

“This divergence in growth trends across education levels alludes to a more serious phenomenon – the income premium for education has narrowed in Malaysia,” noted the central bank.

“If left unaddressed, this could reduce the incentive for the younger population to pursue higher levels of education and potentially exacerbate the brain drain issue in Malaysia.”

The Malaysian government implemented a minimum wage policy in 2013. From Jan 1 this year, the minimum wage for the private sector was increased from RM1,000 to RM1,100 in the peninsula.

Source: CNA/aw(hm)

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