More Graduates Enter Labour Force, But Salaries Fall amidst Skills Mismatch in Malaysia

April 4, 20199:15 am
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An annual report compiled by Malaysian central bank showed a decline in salaries for fresh graduates in the country. Despite the proportion of graduates in the labour force increased from 23.5 per cent in 2010 to 28.3 per cent in 2017, the real starting monthly salaries for most fresh graduates have declined since 2010.

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.

According to the report released on Wednesday (Mar 27), the trend was largely attributed to insufficient high-skilled jobs. A study by Khazanah Research Institute also revealed that 95 percent young workers in unskilled jobs and 50 percent 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.

With an ample supply of graduates and limited demand for them by firms, as consequence, graduate salaries have faced downward pressures. The report said that among the solution to create more high-skilled jobs is to attract new quality investments from both foreign and domestic firms, turning away from the low-cost business model.

The good news is that for those tertiary education, the implementation of minimum wage have helped improve their earnings and allowed them to catch up with their peers’ salary in recent years. 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. 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,” noted the central bank.

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, Channel News Asia reports.

Read also: Academic Qualifications No Longer Main Consideration in Recruitment: Report