AN OVERVIEW OF UNEMPLOYMENT PROBLEM IN MALAYSIA

BY

GROUP 2
BA119
ECO211

CANDIDATES MATRIC NO
NURUL HUDA BINTI MOHD SOBAN 2019409178
NORALIZA BINTI NAZAR 2019289832
NUR HAFIZAH BINTI NORIAN 2019403054
MUHAMMAD NUR IKHMMAL BIN 2019408346
ABDUL GHANI

JANUARY 2021
SEMESTER 2020/2021

TABLE OF CONTENT
 CONTENT PAGES
1.0 INTRODUCTION 3
2.0 ISSUES OF CRITICLE 4
IMPORTANCE TO THE STUDY
3.0 DATA ANALYSES 7
4.0 RECOMMENDATIONS / 10
MEASURES TO OVERCOME
5.0 CONCLUSION 12
6.0 APPENDICES / ADDENDUM 15

1.0 INTRODUCTION

2
 Unemployment means people who are not working but are actively looking for
work. According to the International Labor Organization (ILO) "Persons in
unemployment are defined as all those of working age who were not in employment,
carried out activities to seek employment during a specified recent period and were
currently available to take up employment given a job". According to International
Labor Organization (ILO) those who are working or are looking for work include the
population aged 15 to 64 years. Those who belong to this age group as well, but
unable to work or unwilling to work, is not included in the workforce. For examples is
students, housewives and prisoners.
Almost all people in Malaysia have jobs. The unemployment rate in Malaysia
is relatively low and stable around 3%. Even so, despite these positive statistics, 3%
of those who are unemployed and who are looking for work are from young people,
whether graduates or non-graduates according to news reports. They have trouble
entering the job market because a large number of them do not have the necessary
skills in the employment sector they want. Due to that, the government has
encouraged all companies to open employment opportunities, especially for young
people. A good economic situation also plays an important role in curbing this
problem. However, in this country there are some complaints about unemployment
and gender discrimination.
The reason why we chose this topic is because we want to study how to
overcome the problem of unemployment among youth in Malaysia. Coupled with
pandemic Covid-19 which further increases the unemployment rate in Malaysia.

3
2.0 THE ISSUES OF CRITICAL IMPORTANCE TO THE STUDY

As we can see, the covid-19 pandemic is the latest issues that affecting almost
every people in the worldwide. Because of these viruses, we need to stay at home
for a while so that there is no a close contacting with others to prevent from the virus
spread out. Covid-19 pandemic is a very serious condition that we need to keep alert
because many things people can’t do especially working in community. From this
pandemic also there are many people become unemployment because of some
company cannot handle out their problems.
Besides, study also state a number of causes of unemployment which happen in
global such as increased in population, rapid technological change, lack of education
and skills and rising cost. There are several types of unemployment in an economy
which is classical unemployment, frictional unemployment, cyclical unemployment,
structural unemployment and seasonal unemployment which each type show causes
by a different factor. In final, issues of unemployment can give big impact to our life,
health and economy which is there might be a problem in financial, social and
psychological.
As what have state above, the whole world is facing the highest unemployment
rate due to the main causes of unemployment. Firstly, increasing in population can
lead to highest rate of unemployment because there are many people who are
seeking for a job in one time. There will have a big competition among them who are
seeking for a job because there will a certain people will be pick for that position.
Disqualified people will be marginalized then the rate of unemployment to high.
Secondly, the rapid of technology change also affecting high unemployment rate in
worldwide. Some technology has become an advantage for people such as in
medicals to kill a viruses or bacteria in body for live sake. Moreover, here also have
its cons which factories only rely on the new technology and no need to working with
hands or in physical. Even though out there many people with skills but that cannot
guarantee them to be hired because all the job does not need to using hands
anymore and it all done by all the machines.
The third issue is people are lack of education and skills which happens for most
teenagers that lazy to studying or maybe some of them cannot afford for that. Most
employer find for workers who has high qualification in studies and skills that is for

4
the company sake too so that they can do the best for the company and they can
handle all the factory work. Both education and skills are needed in our life because
it can guarantee our life better than others who does not have it which is they will
become unemployment at the end.
Rising cost in a country also can affecting to unemployment which is they can’t
give an optimum salary to workers because need to give more attention on the other
facilities for its business or company.
There also a number of types of unemployment which is first is classical
unemployment that also known as real wage unemployment. This exist because the
trade unions drive wages too high that can lead to a surplus when it is above the
market-clearing. Because of this, government can lower the minimum wages or
control power trade unions to reduce classical unemployment.
Secondly is frictional unemployment which happened when an individual want to
find a job such as a school-leavers, fresh graduates and re-entrants who quit for their
current jobs to find a better position or higher wages. However, this type of
unemployment can be reducing by provide a jobs vacancy in newspapers, radio or
internet by its company.
Thirdly is seasonal unemployment which exist because of some business
industries might be bothered with a weather condition, climatic changes or changes
in the trend of demand which is usually happen for farming, tourism, fishing and
construction.
Fourth is structural unemployment which occurs when the industries decline due to
changing in market conditions such as introduction of new product and technology
that made the existing product be neglected. This may lead to a worse condition
because of geographical or occupational immobility of workers and can be improve
by government set up a training centre to retrain workers in new skills.
Next is cyclical unemployment which exist when individuals lose their jobs when
there is a recessionary gap or decreasing in demand in the downturn of the business
cycle. To reduce this type of unemployment, government has to implement
expansionary fiscal and monetary policy to boost the aggregate demand.
Besides, there also various things that can be affected by unemployment which is
first, unemployment can sue the individual economy or financial where they didn’t
have fixed income to supports their selves. People needs for money to buy their daily

5
life expenses such as foods to live long. Whenever they become unemployment,
financial is the first things will be affected if they didn’t have any saving.
Second is social which occurs when they will be looked down upon by society
because be unemployed and considered as useless. These victims be the talked of
the town made them being marginalized and have no friends to supporting them at
the back. This also affected to a married couple that can lead to a broken
relationship.
These two effects can lead to a big impact which is problem in psychology. They
will face stress and too high anxiety until can’t control themselves and caused a
psychosomatic. All people must alert with their surrounding and be concern.
Based on study, there are numerous types of unemployment and we can conclude
that the main causes affecting unemployment are increasing population, rapid in
technology, lack of education and skills and rising cost which can leads to financial,
social and psychological problems. Because of this, government should take
responsibilities which they can build more companies and factories so that there is
no high rate in unemployment and making the economy more stable. Although the
country also needs to have at least 3% rate of unemploy ment.

6
3.0 DATA ANALYSIS

The graph below shows the inflation rate from 2000 to 2020.

From this graph, we can see that the unemployment rate in Malaysia from 1999 to
2020. In 2020, the unemployment rate in Malaysia was3%, then increased drastically
to 3.53% in 2001. However, it slightly decreased to 3.48% in 2002.As you can see in
the graph. in 2003 to 2007 it sharply decreasing from 3.61% to 3.23%. The most
unemployment rate was 3.69% in 2009. However, in 2014 the unemployment rate
was 2. 88% and it set the lowest record of unemployment rate in Malaysia. Issues
and Concerns of Unemployment in Malaysia for decades, unemployment is seen as
a negative issue that affects a country all over the world including Malaysia.

7
The Effects of Covid-19 Issue on Unemployment

The pandemic of COVID-19 has developed into a health, socio-economic and of

unprecedented scale and impact, humanitarian crises. The scenario in the Malaysia
is aggravated by the fact that the government came to power only at the beginning of
March 2020 and is already facing a big debt crisis, financial constraints, dropping oil
prices, and the global shutdown's knock-on impact on trade and tourism. Another
worldwide crisis without precedent is here. The trigger this time around is
coronavirus disease (COVID-19). There has been an unprecedented chilling
influence of both the epidemic and the steps to prevent its spread. Moving forward,
the economic destiny of nations may be determined by long-term policy
consequences.
Three major effect of unemployment are present. Firstly, the financial challenges
presented by prolonged unemployment are increasing. It is understood that without
money we cannot do anything; the constant income buys food, clothes and shelter.
Unemployed citizens would be unable to raise money to fulfil financial commitments
because of the lack of jobs. People who refuse to make mortgage payments or pay
rent, for instance, will lose their housing assets and become homeless.
Unemployment often prevents one from doing several things and engaging in
various activities e.g. travelling. Consequently, the national economy is affected by
this, contributing to poverty. Unemployed individuals are unable to sustain the
minimum standard of living as a result of the financial crisis and the reduced overall
buying power of a nation.
There are many evident and well-documented social issues exacerbated by
unemployment. There will be a rise in the levels of alcoholism, substance abuse and
domestic violence due to increased free time and stress. In addition, high
unemployment also leads to increased marriage breakdowns, social divides and
prejudice, suicide rates and crime rates, especially among young people.
Unemployment has also been related to the functioning of the affected family as it
also affects the relationships between the parents with their children and their
spouse. Unemployed parents spend more time with their children, but in contrast
with those of employed parents, the quality of these experiences suffers. On the

8
other hand, it is not clear how unemployment plays a part in these adverse events
and what other similar variables have to do with them.
Unemployment often psychologically influences a person. Several studies have
shown a correlation between unemployment and a loss of self-esteem and trust that
contributes to depression. In addition, an elevated level of anxiety and stress
contributes to psychosomatic disorders, personal worthlessness, and
powerlessness.
In conclusion, around the world, there are various sources of unemployment.
Increased populations, rapid technological change, lack of education or expertise
and increasing costs are the key causes. Economic, social and psychological issues
involve the different consequences of unemployment. Unemployment has become a
big issue impacting our lives, our health, our economy and our culture. In order to
provide more opportunities and positions to respond to the needs of the increased
population, countries should therefore create more companies and factories. In
addition, once they find a job, there should be unemployment benefits to assist
unemployed people in their financial difficulties. In order to promote the education
and skills of employees to meet the needs of the labour market, it is also important to
use vocational education along with other skills courses.

9
4.0 RECOMMENDATIONS/MEASURES TO OVERCOME

Being employed is one of the responsibilities of citizens. But there were a lot of
people especially fresh graduated student, they are facing unemployment in
Malaysia. Therefore, are a few recommended ways to control the problem of
unemployment from expansionary fiscal policy and expansionary monetary policy.
First and foremost, an expansionary fiscal policy able to increase aggregate
demand through a combination of increased government spending and cutting
taxes. This type of fiscal policy is usually used during times of economic slowdown.
To describe how the government can use fiscal policy that will affect to the economy,
consider an economy is experiencing a recession. The government might issue tax
stimulus rebates to increase aggregate demand and fuel economic growth. Fiscal
policy has two types which is contractionary and expansionary. In this case of study,
expansionary fiscal policy is more focus to reduce unemployment. It has two main
tools that must be used in order to decrease unemployment. Firstly, decrease in
taxes such as reduction in service tax, sales tax, income tax or corporate tax.
Hence, cutting taxes is a common method the government uses to spark economic
growth and reduce unemployment. Cutting taxes could put more money directly
into the pockets of consumers, which can lead to increase in revenue for business
expansion and hiring. To sum up, the more business expended, the more
employees required.
Furthermore, instead of lowering the taxes, the government also need to
increase government spending by creating more development projects which will
increase aggregate demand. For an example, build more buildings, highways, or
bridges. More workers needed if government gives this opportunity to the
unemployment. Clearly, if the production increase, it will help to reduce cyclical
employment.
In addition, an expansionary monetary policy is the demand side of economic
policy that target the increase monetary expansion rate to encourage the growth of
the domestic economy. The economic growth should be subsidized by additional
money supply. The money injection will enhance consumer spending, as well as
rising the capital investments. An expansionary monetary policy is commonly

10
executed through interest rates, reserve requirements, and open market
operations.
First and foremost, expansionary uses the tools such as lower the short-term
interest rates. The major monetary policy tool for a central bank is an adjustment
to short-term interest rates. Short-term loans from the central bank usually can be
taken out by Commercial Banks to reach the liquidity shortages. Central bank will
put on charges for a short-term interest rate as a return for the loans. Hence, this
will help to increase the aggregate demand and production. This will also help to
decrease cyclical unemployment.
Other than that, by reducing the reserve requirements. In unemployment,
commercial banks are required to support a lower subordinate of reserves with a
central bank. In such a case, the central bank may reduce some reserve
requirements to increase the money supply and the ability of commercial banks to
provide loans to reduce unemployment.
Next, the central bank may also use open market operations by buying
government securities, short-term bonds or treasury bills that affect the money
supply in the economy. Hence, the investment and consumption will increase the
aggregate demand and production and also reducing cyclical unemployment.
On the other hand, by lowering the base lending rate or bank rate. To lessen
the loans borrowed, central bank will lower the bank rate so that it could increase
the investments by employing more workers.
In conclusion, an expansionary monetary policy can bring some crucial
changes to the economy. For instance, consumers will spend more while
businesses are supported to make huge capital investments by reducing the cost of
borrowing. Other than that, expansionary monetary policy can also increase
inflation, currency devaluation and decrease unemployment.

11
5.0 CONCLUSION

Malaysia’s unemployment rate is no longer a surprise since Covid-19 pandemic

has spread rapidly. Unemployment has become a major problem which is affects our
life and economy. This crisis can be solved if government control the unemployment
using expansionary fiscal policy and expansionary monetary policy. Hence, if our
country able to reduce unemployment this helps to increase economic growth.

12
REFERENCES

https://www.google.com/search?sxsrf=ALeKk03qG0ANLyY9Nm1K6-Vu8jomaQFocw
%3A1609037236030&ei=tPXnX_KuAdLWz7sPiIml6AY&q=definition+unemployment
+by+ILO&oq=definition+unemployment+by+ILO&gs_lcp=CgZwc3ktYWIQAzIGCAAQ
CBAeMgYIABAIEB46BAgAEEc6BAgjECc6CAgAEAgQBxAeULawAViBtgFg08IBaAB
wAngAgAGeAYgBwgOSAQMwLjOYAQCgAQGqAQdnd3Mtd2l6yAEIwAEB&sclient=
psy-ab&ved=0ahUKEwjy2Ijnku3tAhVS63MBHYhECW0Q4dUDCA0&uact=5
https://www.statista.com/statistics/319019/unemployment-rate-in-
malaysia/#:~:text=Malaysia's%20unemployment%20is%20relatively%20low,the
%20strongest%20in%20South_East%20Asia
http://ilo.org/wcmsp5/groups/public/---asia/---ro-
bangkok/documents/publication/wcms_751600.pdf
https://www.marc.com.my/index.php/marc-news/1237-opinion-covid-19-impact-and-
implications-for-malaysia-20200529
https://www.ukessays.com/essays/economics/the-effects-and-causes-of-
unemployment-economics-essay.php#:~:text=The%20top%20causes%20are
%20increased,%2C%20health%2C%20economy%20and%20community
https://corporatefinanceinstitute.com/resources/knowledge/economics/expansionar
y-monetary-policy/
https://www.masterclass.com/articles/fiscal-policy-guide#whats-the-difference-
between-contractionary-and-expansionary-fiscal-policies
https://smallbusiness.chron.com/fiscal-policy-affect-company-74231.htm
https://www.thebalance.com/what-is-fiscal-policy-types-objectives-and-tools-
3305844
https://study.com/academy/lesson/fiscal-policy-tools-government-spending-and-
taxes.html
https://www.gfmag.com/global-data/economic-data/worlds-unemployment-ratescom
https://corporatefinanceinstitute.com/resources/knowledge/economics/unemployme
nt/
https://www.ukessays.com/essays/economics/the-effects-and-causes-of-
unemployment-economics-essay.php#:~:text=The%20top%20causes%20are
%20increased,%2C%20health%2C%20economy%20and%20community

13
6.0 APPENDICES/ADDENDUM

14