Friday, 13 April 2012

Skills mismatch stifling wage growth in Malaysia

Article in the Singapore Business Times regarding a report from the World Bank.

After having lived 16 years in Malaysia and 2 years in Singapore, the big difference that I see is that in Singapore they handle mistakes so differently: they acknowledge them, they take care of the problem, they learn from the whole episode, and they move on. Newspapers are also much more critical.

In Malaysia they love to break down useful feedback mechanisms, while "shooting the messenger" seems to be the national sport with certain persons. I hope that one day Malaysia "gets it" and then things might move pretty fast in the right direction. Until that happens, Malaysia will be an underperformer.

All those issues mentioned in the report of the World Bank below, they are known for so long time, they have been said by so many people, and still ......

World Bank report also says structural reforms required for the modern job

"Much of the country's competitiveness is still derived from low-cost labour - a result of the huge inflow of low-skill foreign workers."

A MISMATCH in education and employment skills has been one of the factors suppressing wage growth in Malaysia and the creation of "modern" better paying jobs, according to a World Bank report.

The report found that although most openings created over the past decade were for skilled professionals, the majority (44 per cent) of existing jobs is still low-skilled.

Transforming the "traditional" labour force to one that is more modern and productive will require structural reforms, including a shift in teaching from a system that emphasised rote-learning to one that is creative and critical thinking, the global development agency said in a Malaysia Economic Monitor April 2012 report on Modern Jobs.

Although Malaysia has set its sights on becoming a high-income economy by 2020, the report's findings indicate the difficulties it faces given its labour market. For one, the majority of jobs especially in the private sector are still low-skilled, and out of five in the workforce, only one has post-secondary certification - and of these, slightly over 5 per cent have tertiary education. This is in line with countries with similar income levels but below OECD nations.

Consequently, instead of innovation or creativity, much of the country's competitiveness is still derived from low-cost labour - a result of the huge inflow of low-skill foreign workers, estimated at 1.8 million in 2010. Skilled foreign labour has declined by about a quarter since 2005.

With the overall unemployment rate is 3 per cent, graduate unemployment is also surprisingly high, at over 20 per cent for arts/business, and 11 to 17 per cent for science, technical and ICT graduates.

The skills mismatch was reflected in a 2011 survey conducted by the Japanese Chamber of Trade & Industry, Malaysia (Jactim), in which 40 per cent of respondents cited "difficulty recruiting technicians, specialised workers, managerial employees" as a challenge in securing high-quality labour.
An equal proportion of respondents cited high litigation risk, while 42 per cent complained of difficulty in hiring Malaysian workers. Employees' low retention rate was the biggest headache for 62 per cent of respondents, reflecting a tendency by staff to move to another job for a little more salary.

In Malaysia, the quality of labour was the fourth top challenge faced by Japanese firms. Higher cost in procurement topped the list (62 per cent), followed by wage increase (55 per cent) while obtaining raw materials and parts at the host country was the least problematic (33 per cent).

The World Bank said an inefficient regulatory environment and insufficient social safety nets also threaten the country's planned economic transformation.

Malaysia is undertaking a review of its education system by local and international experts to improve the quality of its labour force. Findings are expected by year-end.

One way to find talent, the World Bank suggested, is to consider extending a "nearly automatic work permit" for foreign graduates of Malaysia's universities.

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