Malaysia’s youth face some of the bleakest economic prospects

Darryl Tan

KUALA LUMPUR (CNA) – With COVID-19 infection rates levelling out since early May, Malaysia appears to have successfully avoided a worst-case scenario.

The firm Movement Control Order (MCO), enforced by the Malaysian government since mid-March, has been largely credited for containing the pandemic.

But anaemic domestic demand and disruptions in the regional supply chain have placed immense strain on the Malaysian economy.

National GDP may have defied gloomy forecasts by recording 0.7 per cent growth in the first quarter of 2020, but the economy is nonetheless projected to contract as global markets remain mired in uncertainty well into the second quarter.

The potential economic fallout prompted the government to make a surprise announcement that it was easing several key restrictions of the MCO on short notice to get the economy’s engine running again.

Commuters wearing protective mask use their smartphone in a Mass Rapid Transit train, in Kuala Lumpur, Malaysia. PHOTO: AP

As the clouds of economic crisis darken, a generation of Malaysian youth — a 9.5 million strong demographic — head into a recession with fairly bleak prospects.

Unemployment rates among those between the ages of 15 and 24 have consistently hovered over three times the national average throughout the decade.

A 2018 survey by the Credit Counselling and Debit Management Agency revealed that 58 per cent of young working adults lacked the financial resilience to cover three months’ worth of expenses if retrenched.

These adverse economic conditions are attributed to a toxic combination of stagnating wages, increasing costs of living and poor financial behaviour.

The Malaysian central bank (BNM) reported in 2018 that real wages for fresh graduates had declined since 2010, citing the lack of high-skilled job creation as a major factor.

Sluggish wage growth for youth also contributed to the perception of increasing costs of living despite the nation experiencing low headline inflation. Meanwhile, the surge in median house prices over the decade has delayed homeownership and increased indebtedness among young adults.

A recession in the shadow of COVID-19 will intensify the already disproportionate circumstances faced by Malaysian youth.

As austerity measures become widespread, particularly in the hospitality and retail industries where many young adults are employed, young workers are seeing their already low wages being slashed further.

This demographic is also at greatest risk of being laid-off in retrenchment exercises due to their general job inexperience.

Yet heightened instability in conventional employment is likely to result in an employment boom for Malaysia’s fledgling gig economy.

Even prior to the pandemic, the majority of gig workers — typically involved in low-skilled jobs like ride-hailing and food delivery services — were reported to be young and struggling to find a stable job.

The vulnerability of gig workers is amplified due to their lack of full-time work benefits like medical insurance and mandatory retirement fund contributions.

Frustrations over financial insecurity have occasionally surfaced, such as during the worker protests in 2019 when the popular food delivery service foodpanda decided to scrap its existing hourly wage scheme.

Such cautionary tales could become more commonplace as more youth turn to precarious gig employment to make ends meet.

As regulatory policies lag behind industry changes due to a dearth of official data, more young workers risk being trapped in low-skill gig employment long-term.

For now, the recently announced comprehensive stimulus package (PENJANA) appears to hold promise for a short-term economic recovery.

Several major provisions are youth-oriented, including wage subsidies to encourage private companies to retain low-wage workers who are more likely to be young. There is even a matching grant scheme to promote the development of a safety net for gig economy workers.

Looking ahead, the crisis presents an impetus to accelerate several pressing policy reforms that would benefit the youth in the long-term.

First, the pandemic-induced crunch in cheap foreign labour necessitates a shift away from over-reliance on a low-skilled foreign workforce.

Policies should focus on the integration of more technology — particularly in the labour-intensive agriculture and construction sectors — to attract a young, local and skilled workforce.

Agricultural grants aimed at youth entrepreneurs should include provisions for the incorporation of remote sensing applications
and drones.

Similar incentives can be deployed in the construction sector by exempting import duties on heavy equipment used for industrialised building systems (IBS).

Second, work regulations need to be strengthened to adapt to a rapidly-changing employment landscape.

An ideal starting point would be to address the gaps in official data that prevent policymakers from understanding the size of the gig economy. Regulations need to be creative in guaranteeing gig worker welfare without strangling the nascent industry.

Third, the education system needs to equip students with skills that match industry needs.

Malaysia’s Technical and Vocational Education and Training (TVET) system has long been constrained by a patchwork of supporting policies.

Coordination reforms under the previous Pakatan Harapan administration sought to resolve the issues created by overlapping governing agencies and competing accreditation systems.

In addition to continuing these reforms, the government should focus on building up a high-quality teaching force by providing avenues for educators to continually upskill themselves.

The oncoming recession could upend the futures of an entire young generation.

After all, those who begin their careers in a depressed labour market suffer long-lasting consequences on their employment prospects and mental health.

And with a recent constitutional amendment lowering the voting age, adding a potential 3.8 million new eligible voters to the next general election, the stakes for the government are higher than ever.