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Friday, October 25, 2013

Budget 2014: What is in store for young Malaysians? - Steven Sim Chee Keong

OCTOBER 24, 2013

Tomorrow, Prime Minister Datuk Seri Najib Tun Razak will table the 2014 budget.

This is the first budget immediately after a general election, hence Malaysians can generally expect tough fiscal measures by the government especially in view of the enormous pre-election spendings in the last few years. This is probably a budget which no one looks forward to.

I would like to ask, however, what is in store for young Malaysians which constitutes about half the population of our country?

I have said before that young Malaysians today are facing the tri-lemma of either being a statistics of unemployment or underemployment or brain drain. Does Najib’s first post GE-14 budget have good news for young Malaysians especially in addressing the tri-lemma?

Young and unemployed

Today, while the government boasted low unemployment of 3-4%, with the Minister in the Prime Minister’s Department, Abdul Wahid Omar, even saying that this means Malaysia has achieved full employment, youth unemployment is very high.

In 2012, youth unemployment in Malaysia was 10.3%, compared to our neighbouring countries such as Thailand (2.8%), Singapore (6.7%), Japan (8.0%) and South Korea (10.1%). In other words, one in every 10 Malaysian youth aged 15-24 are jobless.

According to a Labour Force Survey Report published by the Department of Statistics in 2011, the highest number of unemployed persons are from those between the age of 20-24 at 40%.

Age group Percentage unemployed (%)
< 20 19.9
20-24 40.0
25-29 17.9
> 20 22.3

Table 1: Percentage distribution of unemployed persons according to age group

To put things in perspective, in a report by the Finance Ministry entitled “Laporan Ekonomi 2011/2012”, it was shown that from January to August 2011, 90.1% or 308,371 persons among the job seekers registered with the Human Resource Department are young people aged between 15-29 years old.

Only 18% of the total work force are degree holders, and recent statistics showed that 75,800 graduates are jobless.

This high unemployment has to be considered against the background of our large civil service. The bloated civil service means that there is an unnaturally large job market ever ready to absorb those who are not able to get a job in the private sector.

But unemployment is not the whole story.

Severe underemployment among Malaysian young people

In a survey conducted by the Asia Foundation Centre in 2012, 75% of the young respondents surveyed agreed that in Malaysia, the problem is not in getting a job but getting a job that one likes.

I have previously raised the problem of youth underemployment in Parliament.

According to the International Labour Organisation (ILO), “underemployment” refers to a mismatch between career aspiration, skills and expectations of a person to his or her actual job. For example, someone with a university degree but is only able to get a job meant for STPM leavers. Or an engineer forced to accept the job of a salesperson because of the inability to get any jobs in the area of training. Or someone having to work for lower pay and in a less than desirable work condition.

There is a worrying trend of underemployment in our country, especially among the youth. Even based on the government’s conservative definition, youth underemployment (aged between 15-24 years old) is high at 15.1%; with the rate being higher for men (9.0%) than women (6.1%). However, upon further analysis, the problem of underemployment is much more acute compared to what is being revealed by government official statistics. For example, 21% of employed degree holders are working in jobs which do not require a degree.

Bright, young Malaysians forced to move out

According to a report jointly published by the World Bank and the Economic Planning Unit (EPU), “Malaysia Economic Monitor: Brain Drain”, one in every 10 Malaysians with a tertiary education migrated to OECD countries in search for better opportunities. This is twice the world average on brain drain. If the migration includes to Singapore, then the number becomes two in every 10 Malaysians.

Hence, we are fast losing our brightest young talents due to the systemic problems with the economy in our country.

High indebtedness and social pressures

Debt is a critical issue in our country. Total household debts in the country has hit 83% of the GDP and the household debt to income ratio stands at 140%.

According to the government’s reply to my question in Parliament last September, 82.5% of our young people below age 30 earn below RM3,000 a month. Those below the age of 30 constitute more than one third of the workers of working age in Malaysia.

Once they leave school and join the job market, young Malaysians are faced with various socio-economic pressures, from servicing their education loan to taking care of their family, to saving enough money to get married and purchasing their own house and car. These, along with their low pay, the encompassing culture of consumerism and the lenient credit regulations led to high indebtedness among young Malaysians.

The situation is very serious for young people. According to the Federation of Malaysian Consumers Associations (FOMCA), 47% of young workers use up 30% or more of their income to service their debts.

Each day, there is an average of 41 individuals being declared bankrupt and over half of them (58%) aged below 44 years old.

The question must be asked, what will Najib’s 2014 budget have in store for them - Young Malaysians who are unemployed, underemployed, forced to move out of the country and are heavily in debt?

If the government introduces GST in Budget 2014, young Malaysian households will be the worst hit. In a research done by the Penang Institute, households headed by those below 24 years old will pay the highest GST as a percentage of their income (GSTI), at 3.25%, and this is followed by those between 25 - 34 of age at 3.05% GSTI.

Household by age group Avg monthly expenditure (RM) Avg monthly income (RM) GSTI (%)
<24 1,745.38 3,127.22 3.25
25-34 2,254.53 4,189.64 3.05
35-44 2,484.70 4,701.58 2.93
45-64 2,514.31 4,769.09 2.86
>65 1,780.15 3,197.05 2.75

Table 2: GST (at 7%) to income ratio according to age of the head of household

“K-Pop budget” will not do

Last year, in 2012, the Youth and Sports Ministry spent about RM68 million to organise a Youth Day celebration in Putrajaya.

This is the one where the controversial K-Pop concert was held. The amount may even be larger as the Ministry has thus far refused to divulge full information about the celebration.

Yet, even at RM68 million, the cost is about 10% of the total 2012 budget of the whole Ministry. What will such spending achieve? How will the RM68 million concert and entertainment address young Malaysians’ tri-lemma above?

If fundamentals such as the quality of education, which includes the independence of our educational institutions, and the over-dependency on cheap foreign labours are not dealt with, I believe the government will never be able to uplift the lives of young Malaysians.

If nothing substantial was done, we must not imagine that an unemployed or an underemployed or a heavily indebted young person today will be better off in 10 years time.

In 2009, a Federal Minister, Idris Jala, warned that our country is headed towards bankruptcy by 2019 if the government do not embark on a reform.

If anything, I would argue that the 2019 economic apocalypse will take place because a generation of Malaysians had been deprived of quality participation in the country’s economy today. - October 24, 2013.

* Steven Sim Chee Keong is the MP for Bukit Mertajam and State Publicity Secretary, DAPSY Penang.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.

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