Underemployment Rises!

 

Malaysia’s unemployment rate officially has held steady for a decade at 3% as of June 2025. But underemployment has been rising – close to the two million mark due to a persistent skills mismatch in the labour market. Skill-related underemployment climbed from 1.183 million in the first quarter of 2017 (1Q17) to 1.956 million in 2Q25, edging up from 1.954 million in the previous quarter. 

By gender, underemployed females rose to 1.073 million in 2Q25 from 1.068 million in 1Q25, while males eased to 882,000 from 886,000. Among those aged 15 to 34, skills-related underemployment increased to 1.239 million from 1.188 million, whereas for those aged 35 and above, it fell to 717,000 from 766,000.

 

Source: https://www.wikiimpact.com

Professor Yeah Kim Leng recently said the trend reflects a mismatch between the graduates that universities are producing and the skills the labour market needs. Skilled labour shortages are evident in sectors such as semiconductors, chip design, robotics and artificial intelligence (AI) applications – and that universities need to reorient their curricula to meet industry demands.

Employment rose to 16.92 million from 16.86 million a month earlier, and from 16.42 million a year ago. The employment-to-population ratio stayed at 68.7% but rose from 68.3% in June 2024. The labour force expanded by about 50,000 to 17.43 million in June from 17.38 million in May, and by almost half a million from 16.97 million a year earlier. With an expanding labour force and rising employment, the labour force participation rate (LFPR) remained steady at 70.8%. 

By gender, the male labour force rose to 10.98 million in June from 10.95 million in May, with the LFPR unchanged at 83.3%. The female labour force edged up to 6.45 million from 6.44 million, with the LFPR steady at 56.4%. The number of individuals outside the labour force was little changed at 7.18 million, mainly due to housework/family responsibilities (43.7%) and schooling/training (40.9%). In 2Q25, Malaysia’s labour force averaged 17.37 million, up 0.8% from 17.23 million in 1Q25 and higher than 16.91 million in 2Q24. The LFPR also improved, rising one percentage point to 70.8% in 2Q25 from the previous quarter.

Based on Malaysian Investment Development Authority data, approved investments in 1Q25 totalled RM89.8bil, up 3.7% from the same period last year. For 2024, approved investments stood at a record of RM378.5bil. 

Unemployment at 3% generally considered full employment. What happens if it is lower? Wages may go up with supply constraints. But underemployment is the issue – how can a religious studies scholar fit into an administrative role in the private sector? He or she may not have any clue on what to do unless he or she is re-trained or has the willingness to “convert”. 

The Government, universities and industry have to map-out what is required for the future. We know we lack engineers, but will there be a revamp of the education system? Is TVET the answer? The current leadership in MoE has a blueprint but no skill set to adopt and adapt changes. That leaves parents and students to survey and decide what’s beneficial for their future. Please change the Minister of Education, anyone else can do a better job! 

Reference:

Underemployment rises despite low jobless rates, Kirennesh Nair, The Star,
12 August 2025