Malaysia faces a significant challenge in its labor market with a high underemployment rate exceeding 36 percent. This issue arises from a mismatch between job needs and academic qualifications. Although the nation boasts a robust STEM talent pool, many of these individuals find themselves in underqualified positions. Human Resources Minister Steven Sim has identified three critical employment paradoxes contributing to this situation.
The first paradox is the "skills-to-job" paradox. Employers often express concerns about the lack of skilled talent in Malaysia, particularly in the STEM sector. Despite having a considerable number of STEM graduates, the demand for skilled professionals remains unmet.
The second paradox, the "education-to-job" paradox, highlights the disparity between the high number of graduates and the limited availability of high-paying, skilled jobs. Malaysia produces approximately 300,000 graduates annually, yet only about 50,000 high-paying jobs are available.
Finally, the "wage stagnation" paradox reveals that despite a tight labor market, wages remain stagnant. The median monthly salary in Malaysia hovers around RM2,700 (US$600), with little upward movement observed.
“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
The country produces around 100,000 TVET (technical and vocational education and training) graduates each year. These graduates possess a higher employability rate compared to their non-TVET counterparts, suggesting that TVET holds strong potential in addressing the skills-to-job paradox.
“TVET has strong potential in addressing the skills-to-job paradox,” – Amirah Wan Usamah
“So, we can see there is quite a high potential coming from TVET graduates, both in their employability and pay,” – Amirah Wan Usamah
Additionally, TVET graduates with degree-level qualifications are more likely to earn above RM5,000 compared to their non-TVET peers.
“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
The Malaysian government has recognized the importance of TVET in addressing these paradoxes and aims to enroll 500,000 students in TVET programs across 1,398 institutions nationwide this year. This initiative aligns with the government's Madani Economy Framework, which seeks to boost the economy by "raising the ceiling and raising the floor."
“Raising the ceiling refers to putting in more money to help the economy move up the value chain, with moves like setting aside RM40 billion in this year’s budget to support loan facilities for small- and medium-sized enterprises, and government-linked investment companies aiming for RM25 billion in domestic investments this year,” – Steven Sim
This framework intends to create a more balanced economic structure by supporting small- and medium-sized enterprises and increasing domestic investments.
The perception of TVET as a viable alternative to traditional university education needs improvement. Societal expectations have long driven university enrollment, often overshadowing TVET's potential as a legitimate path to career success.
“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, companies have reported difficulties finding employees with problem-solving and analytical skills, indicating a gap in how academic programs cultivate essential workplace capabilities.
“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
In response to stagnant wage growth, Malaysia introduced a progressive wage policy program last year. This program aims to address structural issues surrounding stagnant wages, particularly 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
However, as this program remains voluntary, industry buy-in is crucial to achieve its objectives of promoting 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 support TVET's role in overcoming these paradoxes, courses are being tailored to meet employer demands. Memorandums of Agreement have been signed between TVET institutions and employers to ensure graduates are immediately employable upon course completion.
“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
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