Sarawak's Future for Middle-Skill Jobs

Source: SCAN www.tiny.cc/sarawakcan
Based on 9MP figures, can our future generations have sustainable livelihood from secure income and long-term employability? From analysis of 9MP figures and global trends, few conclusions and recommendations can be derived related to Sarawak's human capital development and sustainable livelihood of its people now and in the future.

One key area to take a hard look at is middle-skill jobs. A range of new government policies could help low-income workers obtain more education and training for middle-skill jobs, thereby raising their earnings and their family’s living standards. At the same time, the new Sarawak state government must generate new demand for middle-skill workers, by developing key sectors of the state's economy and by implementing new economic, social and educational policies.

What are middle-skill jobs?

Classifying occupations into a few skill categories is awkward, given the many elements of skill required for most jobs. Under an approach that classifies jobs based on education and training levels, “middle-skill” jobs are those that generally require some education and training beyond secondary school but less than a bachelor’s degree. These post-secondary education or training requirements can include diplomas, vocational certificates, significant on-the-job training, previous work experience, or some college, but less than a bachelor’s degree.

We divide the broad occupational groups into high-skill, middle-skill, and low-skill categories based on Statistics Dept's estimates of the educational attainment and training of people in those jobs. Using this information, we define:


* High-skill occupations as those in the professional/technical and managerial categories.

* Low-skill occupations as those in the service and agricultural categories.

* Middle-skill occupations as all the others, including clerical, sales, construction, installation/repair, production, and transportation/material moving.


This definition is clearly imperfect, since there are many professional/technical and service jobs that are clearly middle-skill while there are jobs in the clerical, sales and other categories that are not; but, on average, these discrepancies tend to cancel out, and trends in these categories roughly capture the ones SCAN wants to focus on.

Salary Trends based on SCAN's Analysis

When wages as well as employment grow faster than average for a given skill group, the implication is that labuor market demand is rising more rapidly for workers in that skill category than for other workers. For workers in middle-skill jobs, recent wage patterns paint a complex picture.

The annual earnings gap between workers with college degrees versus workers with secondary school certs has certainly widened for over 30 years, although it did not increase at all between 2000 and 2006 for full-time workers above age 24. Those with associate degrees now earn, per year of education, a similar wage premium over those with only a secondary cert. In 2006, the median worker with an associate degree earned about 33 percent more than those with only a diploma, while those with a BA degree and no graduate degree earned 62 percent more.

Turning to occupational differences, several middle-skill occupations have experienced rapid wage increases in recent years. In the eight years between 1997 and 2005, the average Sarawakian worker had an overall inflation-adjusted wage increase of only about 5 percent.

Certainly, not all positions in middle-skill occupations pay well or are well-situated on career paths that promise wage advancement and not all middle-skill positions experienced healthy increases in real wages after the late 1990s. In some categories not requiring post-secondary education or training, wage increases lagged behind the average. But the figures indicate that demand for-many middle-skill occupations is rising well enough to generate not only strong employment growth, but also growth in wages.

Job Projections based on SCAN's Analysis

Using its estimates of educational requirements for jobs, SCAN projects that nearly half (about 45 percent) of all job openings in the next 10 years will be in the broad occupational categories that are mostly middle-skill. Another 33 percent will be in the high-skill occupational categories, with the remaining 22 percent in the low-skill (service) occupations.

SCAN projects that Malaysia's net growth in professional and managerial jobs as well as in service jobs will exceed net growth in middle occupational categories. But steady growth in the middle categories is still expected. For example, net job growth in the broad fields of transportation, construction, and maintenance/repair is projected at 11 to 12 percent over the next decade, only slightly below expected average growth for all jobs (12.9 percent).

The projections for detailed occupations point to average or above-average growth in several high-wage job categories that require education and training at the middle level.

All in all, these projections demonstrate that ample employment opportunities will remain in a variety of good-paying jobs in the middle of the labor market over the next decade and beyond.

Sarawak's Future Supply of Skills

Using education as a proxy for skills, SCAN's projections indicate a slowdown in the growth of skills over the next two decades, at both the top and middle of the labour market. In fact, the slowdown in growth among workers with some college education exceeds the slowdown among workers with a bachelor’s degree or more.

This slowdown might not fully materialize, for some reasons such as; if more educated workers choose to retire, if more young people or adults choose to attend college or participate in long-term training, or if more highly educated Malaysians enter Sarawak (perhaps due to changing immigration laws). But some slowdown in educational growth is almost certain to occur.

Another consideration is that educational attainment patterns may understate skill mismatches because of the limited numbers who qualify for specific occupations in high demand. Openings for registered nurses, for example, are expected to jump dramatically over the next 10 to 15 years. Having enough workers with general education at the BA or sub-BA level will do little to meet the increasing demand for nurses unless enough workers obtain the relevant occupational qualifications. Without initiatives to better link the emerging occupational requirements with the education and training obtained by current and future workers, employers will have to import workers or alter their production strategy in ways that may eliminate potentially good jobs.

Policy Implications for The New Sarawak State Government

All these means that the new Sarawak state government under Pakatan Rakyat will need to develop new economic, human capital and education policies that are seamless aligned towards generating sustainable livelihood and better income for Sarawakians.

Complementing government policies, employers will adjust to tight labor markets in a variety of ways - such as with higher wages, more aggressive recruitment, and more selective screening. They will likely also invest more in training. But these investments take time and significant resources.

Furthermore, private sector training investments by firms are often limited by a variety of market failures that lead to suboptimal investments, especially among less-educated workers. These market failures include imperfect or asymmetric information between employers and employees, liquidity constraints in capital markets, and wage rigidities that prevent employers from financing training partly through lower wages. Another reason for under-investment is that employers who train workers fear they will be unable to recoup their investment if other firms hire workers away once they are trained, Under-investments in employer-led training seem to plague less-educated workers.

These market failures might lead to lowered worker performance and productivity in some sectors in the absence of sound policy responses. And the education and earnings levels of disadvantaged workers will also remain below the levels that could have been achieved with appropriate policy measures. The likely short supply of workers in several key sectors offers opportunities to improve the earnings of disadvantaged workers. In particular, low-income kampong youth or adults can raise their earnings substantially and fill many middle-level jobs by undertaking training and post-secondary education. The result will be to improve efficiency and equity in the labor market.

How might this be accomplished? For the kampong or rural youth - especially those in school - it means expanding opportunities for high-quality career and technical education. Options include career academies or vocational training schools, which have demonstrated positive impacts on the earnings of youth and especially rural young men. Other options include technical schools and “Career Pathway” models, which provide ladders into certain well-paying occupational clusters based on school curricula and work experience, beginning in secondary school (or earlier) and continuing into post-secondary education.

For adults, effective approaches involve supplementing education or training, with enhanced links to employers in sectors with strong growth in middle-skill jobs. These approaches should include job search and follow-up services. Often, community or technical colleges, as well as private career colleges, can deliver the relevant education and training.

Labor market intermediaries can play a useful role in coordinating these components and developing connections with employers through “sectoral” training or “career ladders” that attach rural and disadvantaged adults to these sectors and provide pathways of instruction qualifying them for specific occupations and industries. To be effective, intermediaries sometimes must offer stipends during the period of study, as well as child care, transportation, and job placement services. Financial enhancements afterwards might still be needed to incent these workers to remain attached to the labor market.

Expanding apprenticeships is a particularly attractive option for upgrading the careers of both young and experienced workers. Apprenticeship training culminates in career-related and portable credentials that are recognized and respected by employers. It relies mostly on learning in context, an effective method for teaching technical and broader skills, such as communication and problem-solving.

Workers earn salaries during their training, which is particularly appealing to kampong and disadvantaged adults and youth. Sarawak's and even Malaysia's apprenticeship system is underdeveloped relative to systems in other countries, and very few Sarawakian workers are registered with any apprenticeship system. The new Sarawak state government will need to develop and fund an effective apprenticeship system.

How might these and other education and training efforts be financed? Establishment of an occupational training fund would be an important first step. The fund covers occupational training at accredited colleges only for rural youth and disadvantaged workers. One approach would be to allow the fund to provide grants to extend to shorter term training programs and to finance the classroom instruction used in registered apprenticeship programs.

Another option is to use federal government funds from the PTPTN to finance training, an approach that may require changes in how occupational training counts towards the PTPTN application requirements.

Establishment of specific funding to help finance programs for rural and disadvantaged adults. This funding could be accomplished through formula funding or through a new competitive grants program. In this proposal, grants would be awarded to districts to build comprehensive “advancement systems” for the rural kampongs that focus on education and training, pathways that link private employers to training providers and workers, and appropriate financial supports and services. The grants would match new local council or district expenditures and require a great deal of rigorous evaluation. Financial incentives would also be provided for strong performance and for taking programs to scale at the state level (that is, making them large enough to affect earnings outcomes of a substantial share of workers).

These developments must be done together with and in consideration of the development of rural industries.

Whatever exact paths are taken, the labour market data reviewed by SCAN suggest that demand for workers in the middle of the skill distribution will remain quite strong for the foreseeable future, and that policies designed to train more rural and disadvantaged youth and adults for these jobs are a good bet.

Note:
This paper is developed by SCAN for leaders and members only. Data used in the development of this paper have been taken and analysed from government publications such as the Ninth Malaysia Plan (9MP) and Dept of Statistics publications. Information provided here are SCAN's analysis.