Creating two million more high quality job opportunities for high-income Malaysia

Access to high-quality jobs is key for the economic well-being of Malaysians. In the country’s transition to a high-income economy, Malaysia needs to create about two million additional high-quality jobs for workers of all background and skills levels to be at par with other countries that have successfully managed this transition. 

Malaysia is expected to reach high-income status between 2024 and 2028 according to World Bank projections, graduating as a middle-income champion to join an exclusive category of countries at the frontier of development. For the transition to be meaningful for its citizens, Malaysia needs to tackle the challenge of creating high-quality jobs, that is, jobs that are highly productive and covered by social insurance. This challenge is becoming more complex because of the rapid technological progress and the associated changing nature of work – a phenomenon that has been accelerated during the COVID-19 pandemic.

According to the recently launched report, “Aiming High: Navigating the Next Stage of Malaysia’s Development”, creating more high-quality jobs will require proactive policies both on the demand and the supply sides. On the demand side, bottlenecks to productivity and competitiveness need to be addressed. 

On the supply side, proactive policies are required in three broad areas:

First, build foundational human capital. Good foundational human capital is integral to enabling all Malaysians to realize their full potential as productive members of society. According to the World Bank’s Human Capital Index, with a value of 0.61 (on a scale of 0 to 1), Malaysia’s foundational human capital, as measured by health and education outcomes, is lower than the average value of 0.7 in countries that have successfully transitioned to high-income country status. New tools and approaches to building foundational human capital are needed.

Malaysia’s health system is running up against its limits, with a primary health care system that is not well equipped to manage the increasing burden of non-communicable diseases such as high blood pressure and diabetes. Better management of non-communicable diseases will result in a healthier workforce but will require better payment mechanisms, better staffing of doctors, nurses and care coordinators, and better training in the management of these diseases.

In terms of learning outcomes, Malaysia’s performance in internationally comparable examinations, such as Trends in International Mathematics and Science Study (TIMSS) and the Programme for International Student Assessment (PISA), is below the government’s target scores, as well as the average scores of aspirational high-income countries. Addressing these gaps in learning outcomes through a transition from teacher-centered teaching to student-centered learning will be a critical foundation to develop a high-skilled workforce, and to support future growth.

Second, upskill and reskill the workforce, with an increasing focus on digital, socio-emotional and advanced cognitive skills. The changing nature of work means that lifelong learning becomes ever more important as these skills are increasingly in high demand. Already today, about half of online job postings for high-skilled jobs in Malaysia require digital skills – ranging from basic digital productivity tools, such as Microsoft Office, to more advanced digital skills, such as programming. In parallel, jobs involving manual skills are gradually being replaced by those requiring advanced cognitive and socio-emotional skills, such as problem-solving, teamwork, and perseverance.

Third, mobilize underutilized sources of labor supply, particularly women and youth. Policy directions include fostering the school-to-work transition of youth through a unified governance structure for vocational education and enabling more women to participate in the labor market through legal reforms to improve support for parents and better provision of child and elderly care.

Without such proactive policies, women and youth will remain key underutilized sources of labor supply. At 55.6 percent, the female labor force participation rate in Malaysia is lower than in comparator countries – boosting this rate can be a development outcome in its own right and have a significant positive growth impact. Similarly, the unemployment rate among youth aged 15 to 24 is three times higher than the unemployment rate for individuals aged 25 to 64.

Creating enough high-quality jobs for workers of all skills levels is becoming an increasingly complex challenge as the nature of work is changing and Malaysia is moving toward high-income status. If this aspiration can be realized, this will put a big tick in the country’s checklist as it takes its place to be benchmarked among leading economies in the world. It is truly time for Malaysia to aim high.