KUALA LUMPUR: World Bank has found that skill-related underemployment (SRU) affected youth aged between 15 and 24 the most in 2022, making up 63.5 per cent of the total.
SRU in Malaysia has risen significantly, with younger workers, women, and individuals from less developed states being the most affected, according to the World Bank in its October 2024 Malaysia Economic Monitor.
It said factors driving SRU include lack of high skilled job creation, inefficiencies in job matching, and mismatches between education and industry needs.
"An increasing share of young graduates are also found to be in non-standard forms of employment such as contract work or self-employment, without access to employment protection, leaving them with weaker job security, sluggish wage growth and limited upward career mobility."
"Moreover, the SRU rate is negatively correlated with age, and is lower for older age groups (aged 55-64), where the SRU rate stood at 21.5 per cent," it added.
The report noted that older workers are more likely to hold a degree because higher levels of education take longer to complete.
In contrast, younger workers are more often employed in entry-level positions, where their skills may be underutilised.
"Women also face a higher SRU rate compared with men, at 42.0 per cent and 32.5 per cent in 2022 respectively," it said.
The World Bank reported that Kuala Lumpur, Penang, and Selangor had the lowest rates of skill-related underemployment (SRU), while states like Kelantan, Terengganu, and Perlis, which are less developed, had the highest SRU rates, suggesting a scarcity of high-skilled job opportunities in those regions.
World Bank said strategies such as aligning education with industry demands to enhancing Malaysia's competitiveness and support lifelong skill development is needed to address the challenge.