In Malaysia, determining the average salary for fresh graduates has become an increasingly pressing concern amidst rising inflation and cost of living. ¹ The enforcement of a RM1,500 minimum wage for small employers has sparked discussions about its potential impact on the country’s inflation rate, highlighting the need for a balanced approach. ⁴ Navigating the job market as a recent graduate can be challenging, with factors like qualifications, skills, and industry practices influencing starting salaries. ¹

According to reports, the average fresh graduate salary in Malaysia is approximately RM 2,412 per month, with a range of RM 1,949 to RM 2,836. ¹ However, these figures alone do not tell the full story, as financial struggles and brain drain often result from stagnant wage growth and skill-job mismatches. ² This article delves into the root causes, impacts, and potential solutions to ensure meaningful employment opportunities and sustainable financial management for Malaysia’s graduates amid rising costs and inflation. ⁴

The Stark Reality: Fresh Graduates’ Earnings vs. Rising Living Costs

Despite acquiring knowledge and skills through higher education, fresh graduates in Malaysia encounter jobs pegged at the country’s minimum wage of RM1,500. According to a 2023 article, 60% of vacancies offered salaries between RM1,500 and RM1,999, while only 15% offered salaries between RM2,000 and RM2,999 — a stark contrast to the average starting salary for graduates with an honours degree, standing at RM2,700. ^5 6 7 8 The apparent discrepancy between graduates’ expectations for starting salaries and employers’ offerings points to the structural wage problem in the country.

Wage Disparity with Singapore

In contrast, a survey in Singapore found that the median gross monthly salary of their fresh graduates in 2022 had shot up to S$4,200, approximating RM14,800. ^5 6 7 8 With many companies in Malaysia offering salaries lower than RM2,000, it is justifiable that some of our graduates are contemplating job opportunities abroad. For those opting for opportunities at home, a crucial question arises: Will our salaries be sufficient for the cost of living?

Cost of Living vs. Graduate Earnings

The Belanjawanku 2022/2023, an expenditure guide for Malaysians launched by the Employees Provident Fund (EPF), has sparked intense debate due to its estimated minimum monthly expenses required for a reasonable standard of living. According to the guide, a single person living in Klang Valley who is a public transport user would require RM1,930, while a car owner would require RM2,600. ^5 6 7 8 The guide also estimates that these single persons would spend RM610, RM370, and RM250 on food, housing, and personal savings, respectively. In contrast, a 2013 survey conducted by Jobstreet.com revealed that fresh graduates, with an average basic salary of RM2,500, struggled to make ends meet. 77% of the graduates said that their salary does not leave them with any savings after spending on essentials, such as car and study loans. ^5 6 7

Brain Drain and Widening Gap

Over 70% of working graduates earn below RM2,000 per month, and the percentage of those earning between RM1,000 and RM2,000 has increased from 43.7% in 2010 to 54.6% in 2020. ⁷ Consequently, Malaysia faces the challenge of brain drain, with compensation listed as one of the top three drivers. According to a 2011 report by the World Bank, 54% of the brain drain is hosted in Singapore. ⁷ The median monthly income there has risen 46% over the past ten years, from $3,480 in 2012 to $5,070 in 2022. ⁷ This glaring disparity between the two countries, despite their proximity, highlights the widening gap between wages and living costs in Malaysia — one that has many Malaysians struggling to make ends meet. ⁷

The Root Causes: Stagnant Wage Growth and Skill-Job Mismatch

Seniority disadvantages for young workers

One of the primary criticisms of seniority is that it may not always reflect an employee’s actual performance or qualifications. In some cases, less experienced employees may be more qualified or better performers than their more senior colleagues, yet they may be overlooked for promotions or salary increases due to their shorter tenure. ⁹

Another criticism of seniority is that it can create a culture of complacency and discourage innovation and creativity. Employees who have been with an organization for a long time may become too comfortable in their roles and be less willing to take risks or challenge the status quo. This can hinder organizational growth and development and reduce competitiveness in the market. ⁹

Furthermore, in a rapidly changing business environment, seniority may not be the most effective measure of an employee’s value or contribution to the organization. In industries that are constantly evolving, employees who have been with the organization for a long time may not necessarily have the skills or knowledge needed to succeed in the new environment. In such cases, organizations may need to place more emphasis on skills and performance rather than length of service. ⁹

Underemployment: Lower pay from fewer hours

In 2021, the Statistics Department stated that 2.9% of 4.57 million employed graduates worked fewer hours than expected, while 33.9% experienced skills-related underemployment. ¹⁴ Last year, MyFutureJobs data revealed that some 40% of graduates worked in semi-skilled and low-skilled positions. ¹⁴

Oversupply of graduates vs. demand for skilled jobs

Higher learning institutes have been producing more university and college graduates than what the market needs, said Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman. ¹⁴ He added that it has resulted in a mismatch between available jobs and the increasing number of graduates. ¹⁴ Job sectors such as agriculture, manufacturing, service providers, and construction have been affected. ¹⁴

Syed Hussain expressed concern over challenges arising from the growing prevalence of flexible gig work and the shortage of job opportunities that match graduate qualifications. ¹⁴ It is difficult for the private and public sectors to create and sustain jobs appropriate for fresh graduates. ¹⁴ These difficulties highlight the need to address underemployment among graduates. ¹⁴ Private sector employers, who account for 90% of job opportunities, need support to create more job openings. ¹⁴

National Association of Private Educational Institutions secretary general Dr Teh Choon Jin said higher education institutions must take proactive steps to align their academic offerings with current and future industry requirements. ¹⁴ This alignment necessitates the regular updating and adaptation of curricula to incorporate practical skills and knowledge that employers actively seek. ¹⁴ Teh also underscored the importance of fostering strong connections with industries. ¹⁴

Implementing specific and strategic measures is essential to ensure that future graduates possess the necessary skills and strong industry orientation, which could be achieved through focused and targeted approaches that directly address the needs of various industries. ¹⁴ Teh said graduates need to possess field-specific knowledge and a mix of technical and soft skills. Some commonly cited soft skill gaps include communication, problem-solving, critical thinking, presentation and English proficiency. ¹⁴ He added that proficiency in using digital tools was crucial for effective decision-making and innovation. ¹⁴

In the sphere of skill-related underemployment, where qualifications often surpass job requirements, a significant portion of fresh graduates find themselves in mismatched roles, as revealed by data from the Graduate Tracer Study by the Ministry of Higher Education of Malaysia. This trend not only affects career prospects but also exacerbates long-standing issues such as youth unemployment and low starting pay. ¹¹ Factors contributing to underemployment include the expansion of higher education, technological disruptions, and economic challenges. Gender disparities and socioeconomic status further compound the problem, perpetuating cycles of low productivity and limited mobility. ¹¹ Bridging the gap between academia and industry is crucial for empowering graduates and fostering a more equitable labor market. ¹¹

The Impact: Financial Struggles and Brain Drain

Brain Drain and the Need for “Brain Circulation”

Malaysia must reframe the narrative around brain drain, transforming it into a positive concept known as “brain circulation”. ¹⁸ This shift in perspective means that the Malaysian diaspora will eventually return to Malaysia after a predetermined period, thereby contributing their acquired expertise and experiences back to the country. ¹⁸ The ability to reshape the Malaysian labour market will not only bolster the economy but will also, in the long term, exert an indirect influence on factors such as the Malaysian ringgit currency rate, wage levels, and advancements in automation and industrial mechanisation. ¹⁸ If left unchecked, the continuous loss of talent would eventually hamper economic growth. ¹⁸

While the rise in labour force participation rate, both overall and for graduates – together with the present level of unemployment – suggests that the country’s manpower needs are being met, it is nevertheless concerning as the outflow of talents could dent the country’s structural upgrading to a higher value, innovation-driven and knowledge-based economy. ¹⁸ In the longer term, the loss of talents could hamper the country’s aspiration to be an advanced and high-income nation. ¹⁸ Higher-skilled Malaysian migration will probably continue to increase, and this will be a limitation for those domestic sectors in Malaysia that rely on the value contribution of higher-skilled Malaysians. ¹⁸

Financial Struggles and Delayed Independence

The economic challenges posed by high living costs and housing affordability issues significantly impede graduates’ efforts to achieve financial independence. ¹⁵ A substantial portion of their income is directed toward essential expenses, leaving little room for savings or investments. ¹⁵ This can delay their ability to build a financial safety net, plan for the future, or invest in opportunities that could enhance their financial well-being. ¹⁵ Furthermore, the pressure to repay student loans, coupled with the burden of living expenses, can lead to prolonged financial dependence on their families. ¹⁵ Graduates may find themselves unable to contribute to household expenses, which can affect their self-esteem and familial relationships. ¹⁵

Addressing these economic challenges requires a multi-faceted approach. ¹⁵ Policymakers, educational institutions, and employers should work together to find viable solutions. ¹⁵ These may include:

1. Affordable Housing Initiatives: The government can introduce policies to encourage the development of affordable housing, making homeownership more attainable for graduates. ¹⁵
2. Financial Literacy Education: Educational institutions can incorporate financial literacy courses into the curriculum to equip graduates with essential money management skills. ¹⁵
3. Higher Starting Salaries: Employers can consider offering competitive starting salaries that reflect the high living costs in urban areas. ¹⁵
4. Supportive Loan Repayment Plans: Financial institutions can explore flexible loan repayment options tailored to graduates’ income levels. ¹⁵
5. Encouraging Remote Work: Promoting remote work opportunities can reduce the need for graduates to reside in high-cost urban areas. ¹⁵

Government Interventions: Short-Term Relief or Long-Term Solution?

Targeted subsidies and price controls

The Malaysian government has implemented targeted subsidies and price controls to mitigate the impact of rising living costs on the population, particularly for low and middle-income groups. ²⁰ The current fuel subsidy aims to reduce the burden of increased fuel prices in the global market by maintaining a ceiling price of RM2.05 per litre for RON95 petrol and RM2.15 per litre for diesel, despite market prices exceeding these set price ceilings. ²⁰

To ensure that the prices of goods do not rise, the diesel subsidy for vehicles carrying goods will remain at RM2.15 per litre. ²⁰ Additionally, private vehicles in Sabah and Sarawak will continue to receive subsidized diesel at RM2.15 per litre, fishermen at RM1.65 per litre, and public transport such as school buses at RM1.88 per litre during the implementation of targeted subsidies. ²⁰

The Ministry of Domestic Trade and Cost of Living (KPDN) plays a crucial role in combating leakages and enforcing various acts to protect consumers. ²⁰ The ministry strives to create ethical traders and ensure that consumers are always protected. ²⁰

Initiatives for job creation and upskilling

To boost employment rates and grow careers in Malaysia, the government has introduced the 2023 Madani Career Initiatives, which include the Daya Kerjaya and Bina Kerjaya programmes. ²¹

1. Daya Kerjaya Programme:
   • Offers financial incentives to employers who hire long-term unemployed youth, women, persons with disabilities, indigenous people of Malaysia (Orang Asli), vocational training graduates, parolees, former convicts, and those from poor backgrounds.
   • Employers receive financial incentives of RM600 (US$136) per month for three months, starting from the date of hire.
   • Applications for incentives can be submitted by employers beginning April 1, 2023, for new hires from January 1, 2023. ²¹
2. Bina Kerjaya Programme:
   • Aims to strengthen the labor market by increasing the potential of individuals working in the informal sector to obtain formal employment through studies.
   • Covers training fees of up to RM4,000 (US$910) and an allowance of RM300 (US$68) per month for a maximum of three months. ²

Additionally, the government will focus on developing the MYFutureJobs satellite centres in urban transformation centres nationwide to provide employers and job seekers with faster and easier access to jobs. ²¹ MYFutureJobs, launched in 2021, serves as a one-stop centre for career services such as profiling, career counselling, and employability activities. ²¹

The JaminKerja Keluarga Malaysia initiative, set to launch on February 19, is based on the ‘jobs guarantee’ concept, aiming to create 600,000 job opportunities. ²² This initiative is a collaboration between the Ministry of Finance, the Ministry of Human Resources, the Social Security Organisation (Socso), and the Human Resource Development Corporation (HRD Corp). ²²

JaminKerja consists of three main components: ²²

1. JaminKerja Employment Incentive: Incentive applications were open from January 17, 2022, to June 30, 2022, through Socso’s website.
2. Malaysia Short-term Employment Programme (MySTEP): This short-term contract employment programme in the public sector and government-linked companies (GLCs) aims to increase the marketability of job seekers. In 2023, 80,000 job opportunities are targeted, surpassing the previous year’s target of 50,000. ²²
3. Training and Skills Upgrading Programme: The government targets 220,000 trainees to undergo various training and skills upgrading programmes (Reskilling & Upskilling), with 5,000 courses offered by various ministries and government agencies. Initiatives include the ‘place and train’ programme (training + job security). ²²

JaminKerja also encourages employers to provide employment opportunities to target groups such as persons with disabilities (OKU), Orang Asli, and prisoners, with the involvement of various related agencies. ²²

Under Budget 2022, a total of RM6.6 billion was allocated to strengthen Technical and Vocational Education and Training (TVET) through various initiatives implemented by relevant ministries and agencies. ²² The government aims to make TVET the main choice for youths, as it has proven to produce skilled, trained, and entrepreneurial individuals. ²²

The Way Forward: Balancing Wages, Skills, and Job Opportunities

Work-Life Balance in Malaysia

In Malaysia, work-life balance has emerged as a crucial factor for job satisfaction, especially after the pandemic. A significant 42.3% of Malaysians rate it as their top priority, with over 31.4% acknowledging its importance to their overall well-being. ²³ The pandemic shifted priorities, increasing demand for jobs that allow for both professional growth and personal time. As a result, there’s a noticeable shift towards more autonomous and flexible work arrangements. ²³ Businesses that embrace adaptable work models that prioritize employee well-being are likely to see enhanced productivity and impact job satisfaction. Moving forward, maintaining a balance between work demands and personal life remains a key focus for employers and employees in Malaysia. ²³

Employee Engagement and Non-monetary Benefits

The emphasis on non-monetary benefits, such as work-life balance and job security, resonates with the values of the Malaysian work culture. In a culture that prioritizes harmony and stability, employees seek workplaces that offer a supportive environment and opportunities for growth. ²³ Interestingly, competitive salary ranks only fourth in importance for job seekers. Non-monetary rewards like work-life balance, job security, and opportunities for professional growth are pivotal in motivating and retaining employees. ²³ As work practices evolve to meet changing employee expectations, organizations face the challenge of actively listening and adapting to the desires for flexibility, autonomy, and opportunities to pursue individual interests. This adaptability is essential for cultivating a supportive and productive workplace environment. ²³

Balancing Economic Growth and Wage Interventions

Consequently, economic growth and development priorities ought to remain an overarching aim despite short-term targets in driving income redistribution. ²⁴ It is the fundamental role of policy to reduce potential negative externalities and social costs, which had already been partly addressed by minimum wages to reduce poverty. However, excessive wage advocacy may have the unintended consequence of demoting the narrative of productivity, which risks the creation of populist regulations that may stifle the private sector. ²⁴

Regardless of its form, any wage-price rigidity or intervention introduces complexities that are likely to raise regulation costs by the government and compliance costs by businesses. ²⁴ Furthermore, the corporate sector may reduce employment opportunities as businesses make compensatory adjustments to maintain earnings. Such deleterious adjustments could include a reduction in hiring, the reduction of pecuniary benefits, the substitution of labour for technology, the substitution of lower-skilled workers for higher-skilled workers with multitasking requirements, the hiring of undocumented workers and illegal immigrants, diminished investments in training, and the imposition of disproportionately higher output targets. ²⁴ Companies functioning with thin margins may have to close down, thereby reducing the number of available jobs. Employment opportunities and job stability will also be further reduced for individuals with skills and productivity levels that are not envisaged to scale up over time. Hence, minimum wages could have negative effects on marginalised segments of society that are poverty stricken with the least opportunities for education and advancement in the labour market, the group that the government intends to help the most. ²⁴

Wage-price rigidities will create difficulties in capturing the nuances of worker productivity and latent output potential, leading to pricing disparities within the labour market. ²⁴ Furthermore, as Malaysia pivots towards fostering economic complexity, characterised by the need for diverse skills and specialisations, the determination of progressive wage structures becomes increasingly challenging. Correlating wages with productivity is non-linear, particularly in complex, tertiary and service industries compared to basic manufacturing, which is incongruent with developmental goals to advance economic complexity and value-added sectors. ²⁴

Higher wages can trigger ripple effects, including higher inflation, further raising costs for both businesses and individuals alike. ²⁴ Consequently, the government should focus on policies that raise economic growth through real productivity gains, which will in turn increase wages, expand employment opportunities and strengthen the purchasing power of the ringgit. ²⁴ Policies should also address labour market mismatches and incorporate adjustment policies to assist in balancing the supply and demand of human capital. ²⁴ Productivity gains can be driven by a dynamic and competitive labour market, facilitated by market-driven and global benchmarking practices in the management of human capital. ²⁴

Redefining Success: Beyond GDP, Prioritizing Meaningful Employment

Although Gross Domestic Product (GDP) provides useful information on the structure and performance of the economy, it measures only monetary transactions related to the production of marketed goods and services and gives therefore an incomplete picture of the social and natural capital systems within which the economy operates. ¹

GDP should not be viewed as a measure of economic progress, because it can provide misleading indications about how well-off people are and therefore distorts policy decisions. ¹ The Genuine Progress Indicator (GPI), on the other hand, provides a better approximation of the country’s sustainable economic welfare or progress, and draws attention to critical development issues such as the distribution of resources, the costs and benefits of production and consumption, and the value of non-market goods and services. ¹

It is found that over the past two decades, the gap between Malaysia’s economic growth and progress has widened. ¹ This gap is mainly a result of the costs of growth, such as natural resource depletion, pulling down GPI values despite the addition of the positive contributions of monetary value of non-market services and household work. ¹

Challenges in Implementing Better Measures

Data and methodological issues are the major obstacles to developing, implementing, and applying better measures of progress, such as the GPI. ¹ A coordinated effort by various stakeholders is needed to achieve consensus around developing and applying indicators that effectively capture the economic state of society. ¹

To redefine success and prioritize meaningful employment, it is crucial to look beyond GDP and consider alternative measures that provide a more comprehensive understanding of economic progress and well-being. The GPI, which accounts for factors such as resource depletion, income distribution, and non-market activities, offers a more holistic perspective on sustainable economic welfare.

By adopting alternative measures like the GPI, policymakers can make informed decisions that prioritize meaningful employment opportunities, address income disparities, and promote sustainable practices. This shift in perspective can lead to policies that foster a balanced approach to economic growth, environmental preservation, and social well-being, ultimately contributing to a more equitable and prosperous society.

The Graduate’s Perspective: Navigating Challenges with Resilience

In an Urbanized Term: Settling for Less

In an urbanized term, the reality of graduate overqualification could be coined as settling for less. ³² According to a report by the Khazanah Research Institute, graduates in 2021 are projected to earn less than RM2,000 despite holding tertiary education certificates. ³² By settling for less, these graduates are underutilized to ensure that their necessities are sufficient enough back at home. ³² The prevalence of job opportunities that do not align with their formal education has become increasingly common, jeopardizing their ability to sustain a livelihood despite their academic achievements. ³²

The Consequences of Overqualification

For individuals, overqualification often translates to lower wages, diminished job satisfaction, and stalled career progression. ³² This disparity between qualifications and employment roles not only undermines the value of higher education but also dampens the motivation of future generations to pursue tertiary education. ³²

Brain Drain: A Symptom of Political Instability

Brain Drain is symptomatic of the political instability prevailing in the country, as individuals seek the safety and security that they perceive to be lacking in the government’s governance. ³² Rather than waiting for incremental progress, individuals must take proactive steps to improve their lives, seeking greater transparency and stability. ³²

Employment Patterns: STEM vs. Non-STEM Graduates

About three quarters of the 396 fresh graduates surveyed were employed during the survey while the remaining 24.7% were not. ³⁴ In terms of field of study (FOS), both science, technology, engineering and mathematics (STEM) and non-STEM graduates posed rather similar employment patterns. Non-STEM graduates had a relatively higher percentage of graduates unemployed compared to the STEM cohorts. ³⁴

STEM Graduates’ Employability

STEM graduates are generally more employable than graduates with non-STEM degrees. ³⁴ Specifically, engineering and computer science (CS) had a relatively higher share of graduates being employed compared to other disciplines, with a majority of them working in the E&E sector followed by machinery and equipment (M&E); both representing 69.1% of engineering graduates and 61.8% of CS graduates where over 90% of them found a job within six months of graduation. ³⁴

However, not all STEM graduates experienced equal employment opportunities. Applied and pure sciences show lower levels of employability compared to engineering and CS graduates. ³⁴ Only about half of the pure sciences and applied sciences were employed during the survey. ³⁴ The lack of adequate employment opportunities in life sciences and pharmaceuticals in the state and the country in general may be contributing to these low levels of employability. ³⁴

Non-STEM Graduates’ Employability

Within the non-STEM degrees, graduates from accounting & finance (A&F) and business & administration (B&A) have greater employability compared to graduates from arts and social sciences, and food and hospitality. ³⁴ While the latter may be affected by the pandemic, A&F and B&A are highly sought-after degrees in Penang, underpinned by the state’s development focus on global business services (GBS). ³⁴

Among the non-STEM disciplines, arts and social sciences generally have the lowest level of employability, with only about 56% of the surveyed graduates securing a job. ³⁴ These work in various industries, and 20% of them have joined education services. ³⁴ Additionally, the difficulty to secure a job is reflected by 43.5% of those in the education sector who spent more than six months getting employment. ³⁴

Academic Results and Employability

Academic results have a positive impact on employability. Graduates with second class lower and third class degrees were proportionately more likely to be unemployed as compared to those with first class and second class upper. ³⁴

Unemployment and Structural Mismatches

A third of graduates from the pure sciences, applied sciences, arts, social sciences, mass communication and food & hospitality respondents reported being unemployed. ³⁴ While the unemployment for food & hospitality graduates is largely cyclical and was greatly affected by Covid-19, the unemployment of other FOS is associated with structural mismatches. ³⁴

Barriers to Employment

The top barriers to employment were: (1) being unable to find relevant jobs; (2) a lack of suitable employment opportunities in Penang; and (3) being underqualified/ overqualified for the jobs on offer. ³⁴

About 16% of 98 respondents, mainly from social sciences, applied sciences and pure sciences, highlighted the lack of suitable jobs in Penang. ³⁴ This led them to search for jobs in Kuala Lumpur and Singapore. ³⁴ Meanwhile, a number of engineering and A&F graduates with excellent academic grades are awaiting international travel restrictions to be lifted. ³⁴ For those who cited lack of skills needed by the market and being underqualified for jobs, most were engineering graduates. ³⁴

Conclusion

The challenges faced by fresh graduates in Malaysia regarding employment and financial security are multifaceted and deeply rooted in economic and societal factors. Stagnant wage growth, skill-job mismatches, and the rising cost of living have created a perfect storm, making it difficult for many graduates to achieve financial independence and maintain a reasonable standard of living. While the government has implemented various initiatives and interventions, a more comprehensive and sustainable approach is needed to address these issues effectively.

Striking a balance between economic growth, wage policies, and skill development is crucial for creating meaningful employment opportunities and fostering a prosperous society. Collaboration between policymakers, educational institutions, and employers is essential to bridge the gap between academic qualifications and industry demands, promote upskilling and reskilling programs, and foster a dynamic labor market that values productivity and innovation. By prioritizing meaningful employment and adopting alternative measures of progress beyond GDP, Malaysia can pave the way for a more equitable and prosperous future for its graduates and the nation as a whole.