This article first appeared in Forum, The Edge Malaysia Weekly on May 8, 2023 - May 14, 2023

The technical and vocational education and training (TVET) sector continues to receive attention from the government with the prime minister announcing several initiatives under Budget 2023. It was highlighted in the budget speech that despite substantial allocations to the TVET sector (RM6.7 billion for 2023), its graduates continue to earn salaries that do not commensurate with their qualifications. Data shows that just over 10% of TVET graduates earn more than RM2,000 a month and their employment is concentrated at the low- to medium-skill level. Subsequently, the deputy prime minister called on employers to offer RM3,000 as a starting salary to TVET graduates.

Budget 2023 initiatives — such as the TVET hiring incentive, which provides an additional salary of RM600 for three months to fresh TVET graduates newly employed in the private sector, as well as pilot projects for the takeover of selected TVET institutions by private companies, especially government-linked companies (GLCs) — are expected to have a positive impact for these graduates.

A recent study by Khazanah Research Institute (KRI), using the Graduate Tracer Study data collected by the Ministry of Higher Education (MoHE), shows that the outcomes for TVET graduates have improved over the years. Analysis shows that the graduate employment rate (GE) in the TVET sector has increased from 65.5% in 2010 to 87.6% in 2020. From 2012 onwards, the GE rate for TVET graduates has been higher than other graduates from local institutions of higher learning. The percentage of TVET graduates who were still unemployed six months after graduation has also decreased from 34.5% in 2010 to 12.4% in 2020. Accordingly, this rate has been lower than non-TVET graduates since 2012 (2010: 24.5% and 2020: 18%).

It should be highlighted that “employability” does not equate to “being employed or working” as MoHE’s definition states that the GE rate is measured by including three statuses for graduates: (i) employed/working; (ii) continuing their studies; and (iii) participating in upskilling programmes.

Nevertheless, among those categorised as “employable”, between 2010 and 2020, an average of 75.6% of TVET graduates obtained employment almost immediately after completing their studies. Comparatively, among the non-TVET graduates, only 64% were able to land a job within the same period. This positive achievement for TVET graduates can be attributed to the TVET approach to education, which trains students with specific technical skills demanded by the industry. Thus, practical training and hands-on experience may be an added advantage for them compared with those with academic qualifications alone.

Recognising the issue of low starting salaries for TVET graduates and slow wage growth is not new. The KRI study analysed the potential income of TVET graduates by looking at the scenario of graduates who earn above RM2,000 per month.

The study found that graduates’ pay level is closely related to their level of qualification as TVET degree holders earn higher pay than TVET diploma holders. This indicates that expanding opportunities for graduates to further their studies can boost their income level to a certain extent.

Given that TVET graduates are equipped with technical skills in specific fields, it may be easier for them to start a business. TVET graduates who chose to work for themselves are seen as having the potential to earn higher incomes, as the percentage of those earning above RM5,000 is much higher among the self-employed compared with those who work for wages. Interestingly, many of these TVET graduates are diploma holders.

The study also found that among the self-­employed, TVET graduates are more involved in manufacturing and construction activities compared to non-TVET graduates, who are involved mostly in sales and services. This underscores the potential of skill-based education in driving entrepreneurship and its role in creating more job opportunities, especially in industry-based activities.

Despite the current challenges faced by TVET graduates in the labour market, TVET is performing better than it did a decade ago and is becoming more important in providing the manpower needed for economic and social development. This improvement can be attributed to efforts made to address some of the challenges faced by the sector, such as quality assurance, governance, and negative perceptions towards TVET.

Undeniably, the issue of low salaries continues to be a major challenge for TVET graduates and there is still much room for improvement in TVET in Malaysia. However, the issue of low salaries is not unique to this group as graduates with academic qualifications also face the same problem. As shown by the study, obtaining a high income is not impossible even among those who are self-employed. This highlights that the labour market landscape has changed and the idea that only salaried jobs can provide good incomes needs to be changed.

Going forward, strategies that can further enhance the earning potential of TVET graduates are needed so that investments in this educational pathway provide the expected returns both to the country and to the graduates themselves. Such strategies must entail stronger cooperation with the industry, particularly in curriculum development and training delivery, so the graduates produced meet the industry’s needs while simultaneously reducing the industry’s cost in training new hires.

For TVET graduates who are inclined towards entrepreneurship, it is equally important to equip them with business management skills as well as extend support in accessing markets, financing and business mentoring.

The initiatives announced in Budget 2023, such as strengthening collaboration between the public and private sectors, would contribute to increasing TVET’s potential. More integrated efforts among all stakeholders will accelerate Malaysia’s TVET to reach its true potential.

Hawati Abdul Hamid is deputy director of research at the Khazanah Research Institute. The study titled ‘Unlocking the Earning Potential of TVET Graduates’ can be downloaded from the KRI website at www.krinstitute.org.

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