This article first appeared in The Edge Financial Daily on May 11, 2017 - May 17, 2017

KUALA LUMPUR: Malaysia’s youth unemployment rate at 10.5% last year was considered normal among regional and global economies, said MIDF Research.

It noted that South Korea and Malaysia had similar trends in youth unemployment rates since 2011, of which the former recorded a youth unemployment rate of 10.7% in 2016.

“Japan saw its youth unemployment rate go down to 5.2% last year, from 5.6% in 2015, amid structural changes in its demographic pattern. In line with gradual economic recoveries in the eurozone and the US, youth unemployment rates in both economies were on declining paths [to 20.9% and 10.4% respectively last year],” the research firm said in a report on Tuesday.

The number of unemployed youths in Malaysia reached 273,400 last year. The youth labour force refers to those below the age of 25 and this group constituted about 17.8% of Malaysia’s total labour force in 2016.

“Among the age groups, [the] youth unemployment rate remained the highest, registering double-digit rates since 2012,” said MIDF Research, adding that by states, Melaka had the lowest youth unemployment rate at 2.8% in 2016.

It expects Malaysia’s youth unemployment rate to fall further to 10.1%, while the overall unemployment rate to stand at 3.3% in 2017. This is on the back of the Malaysian economy growing by 4.9% this year.

Nevertheless, MIDF Research is of the view that the high youth unemployment rates seen in the global economy are common due to misalignment in the labour market.

“[A] mismatch between supply and demand mainly causes high unemployment among youths. Moreover, the lower demand from industries is possibly due to youths’ lack of work experiences and skills.

“From the industries’ perspectives, recruiting youths may increase business cost as training and mentoring costs will affect their balance sheet, especially during the downturn period. Hence, negative economic shocks such as the prolonged low commodity prices since 2014 could be one of the reasons pushing up youth unemployment rates as most businesses in commodities-based sectors choose to minimise business cost due to [a] lower revenue,” it reasoned.