KUALA LUMPUR, Oct 8 — The World Bank has cautioned Malaysian policymakers about the rising number of underemployed graduates, putting it down as among key issues that require immediate attention in its October’s Malaysian Economic Monitor report released this morning.

Underemployment among graduates has grown from just over a fourth in 2010 to a third in 2022, the Bank said, with the rise noticeable among degree holders. In 2010, just 8.6 per cent of degree holders were underemployed — but that number grew to 26.9 per cent in 2022.

"This is significant as degree holders represented 48.6 per cent of the tertiary educated workforce in 2022,” the Bank said.

Underemployment among diploma holders also recorded an upward trend, while it improved among STPM holders.

By field of study, general programmes and services exhibit some of the highest skills-related underemployment (SRU) rates, at 74.5 per cent and 58.7 per cent respectively. However, these fields only represent a small proportion of total graduates, at 7.9 per cent and 6 per cent respectively.

Fields like health, social services and education, however, exhibit the lowest SRU rates, at 13.9 per cent and 8.0 per cent respectively. The rate of SRU is highest for the youngest in the workforce, at 63.5 per cent for the 15-24 age group in 2022, the Bank said.

The situation is not unique to Malaysia, the report noted. Skills-related underemployment is also observed in other countries, including high-income countries such as Korea Republic, Australia, United Kingdom and the U.S.

But Malaysia’s SRU problems have their own characteristics. The Bank said one of the underlying reasons for the rising SRU is the low number of high-skilled jobs being created for tertiary educated workers.

In 2023, there were just 48,700 high-skilled jobs offered against the 287,000 over graduates produced that same year. The volume of high-skilled job vacancies have remained more or less the same since 2018 while the number of graduates have hovered over 250,000.

By state, Kelantan has the highest number of SRUs followed by Terengganu: over 50 per cent and half of the states’ workforce were found to be underemployed. Perlis and Pahang came in third and fourth. Kuala Lumpur had the lowest number of underemployed graduates, at around a fourth.

"Understanding the main drivers of SRU requires a comprehensive assessment through a nationwide skills survey of labour supply and demand, as demonstrated in several OECD countries,” the Bank said.

"Some key strategies that could address these challenges include aligning educational curricula with industry needs, strengthening Malaysia’s competitiveness to attract quality investments and promote high-skill job creation, and providing lifelong skills that will help weather the changing nature of work,” it added.