Workforce productivity in need of a lift

PETALING JAYA: Malaysia’s skill-based underemployment continues to remain high, despite its improving headline labour conditions, says a World Bank economist.

Unemployment rate has declined to pre-covid-19 pandemic levels of 3.3% in the fourth quarter of 2023 (4Q23). On the other hand, the skills-based underemployment rate stood at 37.4% in the same period.

World Bank lead economist for Malaysia, Dr Apurva Sanghi, said this indicated that Malaysians with tertiary education or a higher education level are underworking in the jobs that they have and are not fully utilising their skills.

“Labour productivity growth was flat last year, remaining lower than the levels in 2019. The manufacturing sector was in negative territory in 4Q23, although the latest numbers last week revealed that the sector is recovering.

“Nevertheless, the broader point here is that the decline in labour productivity growth underscores the need to boost productivity of the Malaysian workforce, beginning with strengthening foundation skills,” he said during the media briefing for Part 1 of the World Bank’s April 2024 Malaysia Economic Monitor, “Bending Bamboo Shoots: Strengthening Foundational Skills.”

Apurva said foundational skills encompass not only educational learning but also nutritional aspects.

“In previous reports, we flagged how stunting and malnourishment in Malaysia is much higher compared with benchmark countries. This obviously has an effect on productivity in the longer term,” he said.

In tackling the issue of underemployment, Dr Yasuhiko Matsuda, World Bank country manager for Malaysia, said there is not only the necessity to generate more and better job opportunities, but also to improve workforce skills.

“For one, companies are not creating enough jobs for individuals who have been trained at a certain skill level. Hence, these individuals have to settle for jobs that require lower skills. In this sense, the solution is to push companies to create more jobs.

“Another is that despite individuals holding formal credentials like university degrees, companies find that they lack the skill sets they are looking for.

“Hence, companies may not create positions requiring those specific skills if they perceive graduates as not meeting their demands, while graduates that actually do have the skills may struggle to find suitable positions,” he said.