Khazanah Research Institute (KRI) School-to-Work Transition of Young Malaysians Salary Report

50% of Malaysian job seekers work in jobs below their educational level

A School-to-Work Transition Survey, by Khazanah Research Institute, conducted in Malaysia, focused on detailing the transition from school to work.

The survey, which canvassed close to 24,000 respondents, was targeted at youth in upper secondary schools, youth in tertiary education, young job seekers, young workers and employers.

The research also identified some of the working preferences and habits of young workers which employers should be aware of in order to better manage their young talent pool:

A large majority of young workers working in unskilled jobs for which they are over-qualified

Due to the mismatch between jobs and the education level of workers, those with higher educational background than required would be considered over-educated and those with lower than required education level are under-educated for their jobs.

As a result, 95% of the job seekers end up in unskilled jobs with half of them being over-educated for their jobs. They are likely to earn less than they otherwise could have in jobs that matched their level of education.

The under-education of young workers would also have a negative impact on worker productivity and thus, on the output of the enterprise they are working for.

Job seekers embrace mobility but only within the same state

Potential employees indicate a willingness to move to find work, with half of them saying that they are prepared to move anywhere.

However, most prefer shorter moves within the same state and especially to urban rather than rural areas. Their mobility is also more limited between Peninsular and East Malaysia and also to other countries

Low remuneration and inconvenient locations among the main reasons for rejecting job offers

Those who had been previously employed or are currently working but on the lookout for other jobs are more likely to reject job offers as compared to first-time job seekers.

The main reasons for rejecting job offers are that the pay offer was too low or the location was not convenient.

Additionally, female job seekers are more likely to reject a job because the location was not convenient. Males, on the other hand, turn down jobs for pay related reasons

Paid employees prefer working in public and education sectors the most

Salaried employees indicate a strong preference for work in the public sector/civil service and also in the education sector.

The self-employed, on the other hand, list out wholesale and retail trade, online business and accommodation, food and beverage service activities, as their preferred industries—these are the sectors where it is relatively easy to create one’s own employment. Where there is a preference for the agriculture, forestry and fishing sector, the young workers are more likely to be self-employed.

Moreover, status in employment affects what young workers consider to be the most important aspect of a job.

For those in both regular and non-standard employment, job security is what they look for in a job.

However, those who are self-employed consider work-life balance to be more important. In fact, the flexibility to be able to better balance work and family life is often a significant reason why men and especially women choose self-employment.

The report also revealed employers’ hiring preferences, summarised as follows:

Age group

Employers typically prefer workers aged between 25 to 29 years old, for skilled/professional workers.  However, younger people below 25 years old are favoured for low-skilled/manual jobs.

For skilled positions, public sector employers also prefer those between 25 and 29 years but for low skilled positions, they would rather hire people below 25 years.

Gender and marital status

 For more than 60% of all enterprises, gender does not appear to be a major criterion for employers to hire either skilled or low-skilled workers.

• Where there are preferences, the large and medium enterprises choose male workers for both skilled and low skilled jobs. The rest strongly prefer female workers, especially for skilled/professional jobs.
• For skilled jobs, more than 90% of MNCs and public sector employers indicate no sex preference; where the other types of enterprises indicate a preference it is for female workers.
• With regard to low-skilled jobs, the family businesses and private contractors strongly prefer male workers.
• Marital status is not a specified criterion. Where there is a preference, it is for those who are not married.

Educational qualifications

• However, there are clear differences in preference by educational qualifications for skilled and low-skilled workers. For skilled workers, the large enterprises prefer undergraduates from local universities, followed by SPM holders who have completed five years of secondary schooling, then technical education and vocational training (TVET) graduates.
• On the other hand, the micro enterprises have lower educational criteria for skilled workers, 63% choose SPM holders. For the low-skilled workers, employers specify lower educational requirements – 85% only require workers who have completed upper secondary schooling.
• Employers from the public sector, public listed companies and also private contractors prefer Undergraduates from local universities for skilled jobs. Other employers who indicate a preference for TVET graduates in skilled jobs include sole proprietors, private limited companies and especially private contractors.
• For the low-skilled or manual workers, employers do not have strong educational preferences;
• Where there are preferences, public sector and public listed companies indicate a preference for TVET graduates.

Languages

• For skilled/professional jobs, employers, especially in large and medium enterprises, prefer English-speaking candidates.
• However, employers of low-skilled jobs very distinctly prefer Malay-speaking candidates. Language competency is less of a concern for micro enterprises when hiring either skilled or low-skilled workers.

Infographics / Khazana Research Institute

KRI calls for govt review of wages as levels too low

Malaysia’s low-wage environment has forced young job seekers to be willing to work for as low as RM1,715 on average, or about 40% lower than 2017’s national mean monthly wage.

Khazanah Research Institute (KRI) made a startling revelation that many young people, particularly those in part-time jobs, are even willing to work below their reservation wage just to land a job. The reservation wage is the wage below which youths would refuse a job offer.

This calls for an urgent review of wage levels by the government, urged the think-tank.

In its “School-to-Work Transition of Young Malaysians” report, KRI said that the review could also consider “the likely desirability of establishing a living, fair and decent wage, and not just a minimum wage.

Earlier this year, Bank Negara estimated that a Kuala Lumpur-based single adult’s living wage in 2016 should have been about RM2,700. However, nearly 50% of the working adults in Kuala Lumpur earned less than RM2,500 per month in 2016.

The Malaysian Employers Federation executive director Datuk Shamsuddin Bardan who spoke to The Star then, described the living wage concept as “unrealistic” in Malaysia for the time being.

The “School-to-Work Transition of Young Malaysians” survey report, which was launched yesterday,was conducted from the end-2017 to the start of this year in order to collect education and labour market information on youths aged between 15 and 29.

Nearly 24,000 students, job seekers, workers and employers participated in the survey.

KRI debunked a common myth among employers in Malaysia that young job seekers demand high and unrealistic salaries.

“Employers complain that fresh graduates are “asking for too much”, [with salary expectation] of between RM2,400 to RM3,000. The report’s data show actual monthly income (mean value) of RM1,846 for young workers and reservation wage of RM1,715 for young job seekers,” it said.

According to the report’s lead author and KRI senior visiting fellow Lim Lin Lean, high income only ranks fourth among the youths’ seven top job characteristics.
The first on the list was work-life balance.

“It is not true that youth unemployment occurs because of their high salary expectation. This is exactly the opposite of our findings and this is exactly what our report is trying to debunk,” she told reporters at a press conference .

Lim also pointed out that the surveyed youths consider foreign workers as competitors for job opportunities. She called upon the government to review the Malaysia’s cheap labour policy, which affects the country’s productivity and growth.

“The different youth groups feel that both low-skilled migrants and high-skilled expatriate workers threaten their job opportunities. They clearly want expatriate jobs.

“When they do not want the migrant jobs, it is because these are “3D” jobs – dirty, difficult and dangerous – that offer too low pay, particularly when they can get higher wages from doing such jobs in Singapore,” she added.

However, online hiring agency Jobstreet.com said its own salary trend survey showed starting salaries have increased over the year even as Khazanah Research Institute (KRI) released a separate study that indicated wage stagnation among new workers.

A comparison of job advertisements on JobStreet.com between 2017 and this year showed the average starting salaries offered by employers increased by five to seven per cent on average, a company spokesman told Malay Mail, but noted that the percentage varied according to sectors and location.

“We have not seen this trend among employers,” Gan Bock Herm, country manager of JobStreet.com Malaysia, said in a statement sent to Malay Mail.

The agency cited salary differentials in three main sectors: manufacturing and production, banking and financial services, and construction, buildings and engineering.

In manufacturing and production, the maximum average starting salary offered in 2017 was RM2,937 but increased to RM3,224 this year while in banking and finance, the hike was less pronounced — RM3,588 in 2017 compared to RM3,695 this year.

Construction had the biggest increase according to the report, from an average of RM3,205 to RM4,009.

KRI released a school-to-work transition survey last Wednesday that gathered crucial data and insights into the state of employment among youths today.

Much of the study’s key findings pointed to a problematic labour market dogged by an oversupply of graduates with mismatched skills and qualification, and little available high skill jobs.

KRI concluded that a large number of degree holders are forced to scramble for a small amount of high-paying positions.

The findings explained why starting salaries offered to graduates today remain very low, at less than RM3,000 median average, similar to that offered over ten years ago.

Contrary to Jobstreet.com, Adecco Malaysia, another leading recruitment firm, concurred with the KRI study. The company told Malay Mail that its own survey found the starting salaries for Malaysian degree holders today remained the same since the last decade.

Adecco cited its own salary trend that found the average starting pay multinational companies offer to fresh graduates with an engineering degree to be around RM2,800 per month, findings that tallied with data gathered by KRI.

Local small and medium-sized enterprises, on the other hand, tend to pay less, in the range of RM1,900-2,300.

“Millennial degree holders today are still being paid around the same starting salary as 10 years ago,” Adecco country manager, Raj Kumar, said in an emailed statement.

“Job vacancies in Malaysia are skewed towards elementary (low-skilled) occupations,” he added.

Adecco attributed the key issue to poor “quality growth”. The agency said that while the huge employment figures may suggest growth, the reality is that much of it are in sectors that require low to mid-skilled work like mining, accommodation and food and beverage.

“This, in essence, is the root cause of the problem — even though the country GDP and employment are growing, the quality of growth is an issue,” Raj stressed.

“Creating high-value, higher-paying jobs has been an issue in Malaysia,” he added