Policies to Tackle Youth Unemployment

By Wong Chen

I have been invited by Kesatuan Penuntut Undang-Undang Malaysia di United Kingdom dan Eire (KPUM) to do a zoom webinar tonight (1st August 2020) on the topic of youth unemployment. The students are interested to hear my views on what possible policies we can implement to address this pressing global problem. Here are some of my thoughts on the matter. These thoughts are arranged into three sub-topics; (a) structural policies; (b) empowerment policies, and (c) Malaysian specific policies.

Structural Policies

The problem of youth unemployment is the lack of good paying jobs. The root to this problem is the massive inequality found in our economic system, in particular within our corporate and organisational structures. Behaviourist’s economic thinkers believe that about 70% to 80% of the economic activities are made or decided at the organisational level. The free market plays a much smaller 20% to 30% direct role in the economy. I do subscribe somewhat to this thinking.

Hence to address the issue of unemployment (youth or otherwise), we need to change how companies organise themselves. In particular, we need to have specific policies to distribute wealth between the shareholders and the workers. By tackling inequality of income and wealth within organisations, we will be able to create a much bigger middle class and this in turn will encourage the economy to grow and hence employ more people, including youths.

Ideas such as shared ownership schemes and limiting CEO pay to a lower ratio of 20 : 1 can be implemented by incentivising good behaviour by companies; i.e. providing corporate tax breaks. In the UK, employee owned companies such as John Lewis Partnership maintain high employment rate and has proven to be resiliently competitive too. If a mere 10% of all companies adopt such similar organisational structures, the world will have a much more robust employment economy with room for youths too.

Another structural policy that we can explore is to provide Youth Unemployment benefits as a stop gap measure. In these challenging times of Covid-19, this measure is even more urgent. However, we have to be very careful to ensure that this policy does not end up encouraging youths to prefer lazing around being unemployed rather than actively look for a job. While a welfare support system is essential, we too must have a graduation time limit for this support. Instinctively, I would say a fair support time that does not last longer than 18 months of benefit. Behavioural economics research can be deployed to assess and develop an optimal and balanced program.

The last structural policy that I would recommend is to introduce greater regulation to the gig economy. The gig economy is generally exploitative; it promises good short term income with not long term labour protection and rights. Most Youths who make money in the gig economy will not be able to work in this sector for more than five years. There are very few windows for personal growths, skill enhancement and promotions. A policy that “normalises” the gig economy with labour rights and job security will provide job stability and hopefully prospects for long term employment for youths. The gig economy proponents need to grow up and be counted in tackling the unemployment crisis.

Empowerment Policies

These policies are a little more common but still important. Since I don’t have a lot of article space to elaborate these policies, I will try my best to simplify them. To tackle youth unemployment, the government should run programs to encourage entrepreneurship. These can done with cash grants and also training, in particular on marketing skills. The government should also encourage more matching programs and job fairs, building better links between companies and the universities. This will enable companies to relate to universities the type of graduates they are really seeking to employ. This in theory should result in greater graduate employment. As for the non-graduate youths, the government must focus on modernising technical apprenticeship programs. Lastly, all secondary schools should have more resources to pump up the career guidance office, so that students are encouraged at a younger age to think ahead and prepare for future employment options.  

Malaysian Specific Policies

Before Covid-19, Malaysia does not really have a serious unemployment problem. Pre-Covid-19, we have an average unemployment rate of 3.5%. Even our youth unemployment rate is relatively lower at 11% compared to the 13% global rate.

What we do have is a dysfunctional employment system that relies heavily on cheap migrant labour. We have 2.5 million legal migrant workers and an additional 3 to 4 million undocumented migrant workers. Our migrant workers are mostly exploited with little rights, and in addition the migrant workers employment trade is riddled with massive abuses and corruption.

To solve this problem, the government should focus on eradicating human rights abuses, remove the corruption in the employment trade and gradually reduce the migrant workers dependency by at least 50% within 10 years. To meet this gradual shortfall of migrant workforce, Malaysian companies need to be incentivised to spend on capex, productivity and machines, which will then create more specialised jobs for more skilled Malaysian youths.

Lastly, allow me to reinforce this urgent message on the Covid -19 pandemic. All over the world, numbers are rising at a faster pace than the months of March to June. With cases increasing even in “safe” countries such as China, Japan, South Korea, Vietnam and Singapore; we in Malaysia have to be more vigilant than ever. I am alarmed to note that many Malaysians are letting their guard down, travelling more, eating out more, and generally not practising as much mask wearing and social distancing. We have to do much better. If the numbers pick up, we may have to go back to lockdown, which will be very severe for the already weakened economy. As such, I appeal to all to please do your part, be more vigilant, and help us prevent the need to lockdown again.