Malaysia faces a complex "skills-to-job" paradox that continues to challenge its labor market and economic growth. Employers in the nation, particularly in the STEM sector, report a scarcity of skilled talent, despite the country's production of approximately 300,000 graduates annually. However, only 50,000 high-paying, skilled jobs are available, leaving many graduates underemployed. This has resulted in an underemployment rate exceeding 36%, highlighting a significant mismatch between job needs and academic qualifications.
Despite a low unemployment rate of 3.2%, this has not translated into higher wages for Malaysian workers. The median monthly salary remains at about RM2,700 (US$600), illustrating a "wage-to-job" paradox where low unemployment fails to boost wages. Additionally, the "education-to-job" paradox exacerbates the situation, as the number of graduates surpasses the available jobs. To address these challenges, Malaysia must enhance coordination among policymakers, employers, and educators.
Technical and Vocational Education and Training (TVET) courses have emerged as a potential solution to bridge the skills gap. Offered at various educational institutions across Malaysia, TVET courses range from levels 1 to 5, equivalent to an advanced diploma or associate degree. The job placement rate for TVET graduates has shown improvement, rising from 87% in 2020 to 94.5% in 2023. To further enhance TVET's appeal, the government proposes introducing levels 6, 7, and 8, equivalent to bachelor's, master's, and doctorate degrees.
“What I'm trying to say is this: If you are thinking the current university model will be able to fill your job market demand, then you are delusional. Because universities … (are) not created for the industrialised world,” – Steven Sim
Government initiatives aim to make TVET more attractive and accessible, including a one-stop application portal and the development of a "skill university" without a fixed term schedule or racial quota. The Minister of Education has even enrolled in a TVET course in corporate leadership to promote the program.
“I personally believe if you want to create higher-paying jobs and improve salaries, we have to move away from the ‘buy cheap, sell cheap’ economic model,” – Steven Sim
Malaysia’s economic model must shift from relying on low-cost labor and products to fostering higher-value industries. As Steven Sim highlighted, the nation must invest in moving up the value chain. This includes setting aside RM40 billion in the current budget to support loan facilities for small- and medium-sized enterprises and targeting RM25 billion in domestic investments by government-linked investment companies.
“(If) you want to buy everything cheap, you want to be subsidised for utilities, you want to buy cheap labour, then you will never be able to improve,” – Steven Sim
Moreover, societal expectations push for university enrollment as the primary path to career success, often overshadowing TVET as a viable alternative.
“This is partly due to a push for university enrolment driven by societal expectations. In many ways, Malaysian society is ingrained to believe a university degree is the only route to career success, which also leads to the perceived lower status of TVET as a viable alternative,” – Edwin Oh Chun Kit
“Moreover, many companies report difficulty finding employees with problem-solving and analytical capabilities, suggesting a gap in how academic programs cultivate critical workplace skills,” – Edwin Oh Chun Kit
The introduction of Malaysia’s progressive wage policy program last year marks a positive step toward addressing stagnant wage growth, especially in technical occupations.
“Malaysia’s recent introduction of the progressive wage policy program last year is a step in a positive direction in addressing structural issues surrounding stagnant wage growth, especially among more technical occupations,” – Amirah Wan Usamah
The program's success depends on industry participation to promote wage growth while enhancing productivity.
“As the program is voluntary, buy-in from the industries is important so that the objectives of promoting wage growth whilst increasing industry productivity is achieved,” – Amirah Wan Usamah
To further enhance employability and meet industry demands, TVET institutions have signed Memorandums of Agreement with employers.
“The courses provided are tailored to meet employer demands, particularly from industries, and Memorandums of Agreement have been signed between TVET institutions and employers,” – Ahmad Zahid Hamidi
“This means that upon completing their courses, TVET graduates will immediately be employed by these employers,” – Ahmad Zahid Hamidi
TVET graduates exhibit high potential in terms of employability and pay.
“So, we can see there is quite a high potential coming from TVET graduates, both in their employability and pay,” – Amirah Wan Usamah
Degree-level TVET graduates earn significantly more than their non-TVET counterparts.
“Additionally, when we look at degree-level TVET graduates, there is a much higher proportion of them earning above RM5,000 compared to their non-TVET counterparts,” – Amirah Wan Usamah
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