CHAPTER ONE

1.0 INTRODUCTION

Human manpower resources, which are potential and competitive in developing economic

of a country, are needed in this globalization era. Even though it is not written in any company

statement reports of any organization, this type of human capital is important in determining the

performance of an organization in the country. Without qualified human capital resources, a country

becomes weak as the lack of human factor that can initiate new initiatives in socioeconomic

activities. However, producing human capital resources that are comprehensive and at a world class

level is not an easy task and it is a challenge to Malaysia. Currently, unemployment among the

graduates becomes an issue, not only in Malaysia but also in entire world.

The Department of Statistics Malaysia (2011) found that the unemployment rate in

Malaysia had increased from 3.2 % in 2007 to 3.7% in 2009. Human Resources Ministry, Fong

Chan Onn, stated that the National Economic Action Council with the collaboration of the

Department of Human Manpower had conducted a census in 2005 and they have found that 59000

graduates and diploma holders were unemployed after their graduation and 30000 graduates worked

in a field that does not related with their higher educational qualifications. Based from resources of

job vacancies and job placement in Peninsular Malaysia in 2012, it is revealed that job vacancies

are increasing from year to year. However, these job vacancies are filled by only a part of the

workers. This shows that the unemployment issue is happened not because of the lack of job

opportunities instead it happens because of other factors such as the low quality graduates produced

in higher education institution.

 Even though the unemployment rate in Malaysia is considered low as compared to

countries like the United States and other countries in Europe, it is not an issue to be neglected as

the rate of unemployment increases year by year.

Since manpower resources is necessary in producing a productive and high-income country,

this paper aims to identify factors that lead to the unemployment issue among the Malaysian

graduates and hence it can hopefully become guidelines in resolving this problem from occur more

rapid.
 1.1 THEORETICAL FRAMEWORK

- A rapid increase of graduated

workforce
- Lack of training for work
preparation
- Rapid increase of the population
rate and rapid decrease of the
mortality rate
Factors influences the rate
- Educational development of unemployment of fresh
- Economic recession graduates in Malaysia 2016
- Capability and quality of graduates

Figure 1: Factors influences the rate of unemployment of fresh graduates in Malaysia

2016
 Based on the figure 1, generally the rate of unemployment of fresh graduates in Malaysia 2016

is influenced by several factors. Nasrudin (2004) in his article mentioned that there were six factors

that influenced the rate of unemployment of fresh graduates in Malaysia 2016. The factors were: a

rapid increase of graduated workforce, lack of training for work preparation, rapid increase of the

population rate and rapid decrease of the mortality rate, educational development, economic

recession, and capability of graduates.

1.2 FACTOR AFFECTING THE UNEMPLOYMENT OF FRESH GRADUATES IN

MALAYSIA 2016

1.2.1 Rapid increase of graduate workforce

As technology increases these years, its been easier for all the students to enrol into

university and pursue their higher education especially in a private university. Therefore, the rate of

fresh graduates produced increases year by year thus provides a large force of graduate workforce

available in the market. When rapid increase in graduate workforce occurred, thus the availability of

the job in the market is limited. This cause the rate of unemployment of fresh graduates increases

yearly.
1.2.2 Lack of training for work preparation

Institutes of higher education nowadays are more on syllabus basis. They focus on educating

teenagers according to topics and chapters in a book. A students achievement is merely being

judged by their examination result, grades and CGPA which is all examination bases. Thus the

student themselves start to neglect the purpose of higher education which is to prepare themselves

to cope with working world and they are more focused on studying theory and memorizing stuffs

for examination. Therefore, the fresh graduate that is being produced is lack of training for work

preparation and causes the unemployment rate increases.

1.2.3 Rapid increase of the population rate and rapid decrease of the mortality rate

Rapid increase of the population rate but mortality rate decreases also causes fresh graduates

to be jobless. This because there is limited job vacancy is offered daily in the country. If those that

is working till old, then the new generation will never get chance of applying that particular job.

Besides, employers prefer employees with experience which means those that has worked for years.

This requirement actually reduces the chances of a fresh graduate to apply a job at the moment.

Besides, rapid increase of population rate means the population of fresh graduates increases too.

Therefore there are abundant amount of fresh graduates man force capital is available in market but

the job vacant is very less. This actually causes the rate of unemployment of graduates to increase.
1.2.4 Educational development

Educational development in Malaysia is also one factor that affects the rate of

unemployment of fresh graduates in Malaysia. The main factor to the unemployment problem

among graduates is the failure of higher education institute to ensure the syllabus or curriculum

consistent with the matters required in the job market (Utusan Malaysia, 18th May 2005). The

universities failed to provide curriculum and components of educational field that is required in

workplace skills. This causes difficulties among the graduates to obtain job that match their skills

and qualification. Basically they are unable to implement what they studied in institute in real life

working field. This causes companies not preferred to hire fresh graduates from university and they

added the requirement where employees need to have few years of working experience.

1.2.5 Economic recession

Economy factor also one of the main reason fresh graduates are being unemployed these

days. For many years, the manufacturing sector has been the strongest sector in the country until it

is now being progressively replaced with service sector due to technology development. The

services sector requires people who do not only possess the right technical knowledge, but also

those who possess the right soft skills interpersonal, communication, wisdom, maturity and are

business oriented. But due to technology era, manpower is being replaced with computers and so

on. This causes unemployment rate of fresh graduates increases. Besides that economic recession

would also cause fresh graduates to be unemployed. A recession will lead to drop in consumer

spending, affecting the business which lay off workers due to losses. A recession occurs when there

are two or more consecutive quarters of negative gross domestic product (GDP) growth. This means

economic growth is slower during these periods which lead to fall in sales, stock prices incomes and

maybe bankruptcy also. Thus the rate of unemployment of graduates increases during these periods.
1.2.6 Capability of graduates

The capability of graduates is being questioned and this is one of the main factors of

unemployment of fresh graduates in Malaysia. Due to concentrating to much in excelling in

education part, these graduates failed to improve their soft skills qualities such as technical skills,

problem-solving skills and communication skills, especially in English language and also in the

aspect of management, problem-solving, communication, leadership, creativity, critical thinking,

proactive, self-confidence and interaction skills which is important in working life. Thus this causes

employers not to prefer to appoint a fresh graduate in working places. They prefer someone with

experience as those employees are well known with working environment. Besides that, graduates

find it hard to cope with new working environment once graduated as what they studied and what

they implement is two different things. Furthermore, these graduates are lack of confidence during

attending interviews because they have never gain experience in such a situation. All these leads to

unemployment factor of fresh graduates in Malaysia.

1.3 Problem Statement

Unemployment issue in Malaysia

Rahmah et al. (2011) mentioned that one of the factors that contribute to the unemployment

problem among the Malaysian graduates is the quality of the graduates. There are employers in the

industry, who gave negative comments on the graduates and mentioned that the graduates do not

have the suitable skills and qualifications, which meet the needs of the industry. Besides, the

graduates are weak in the aspect of employability skills and do not show a good working

performance. A study conducted by Central Bank of Malaysia (2002) also found that the Malaysian

graduates are less skilled as compared to the international graduates. The skills include technical

skills, problem-solving skills and communication skills, especially in English language. Ranjit

(2009) mentioned that ten primary weaknesses of Malaysian graduates are in the aspect of

management, problem-solving, communication, leadership, creativity, critical thinking, proactive,

self-confidence and interaction skills. These aspects lead to the difficulties for the graduates in

obtaining jobs, which meet their qualifications. There are also job industries reporting that the

reason for job vacancies in a working field is because of lack of candidates, who are qualified for

the posts. This is shown from a report by National Associated of Manufactured (NAM), in which it

is revealed that there are gaps exists in the range of skillfulness in almost all of the working fields

(Kahirol et al., 2008).

 Consequently, this is the reason that makes an interviewed candidate is not selected to gain

the post as the candidate do not meet the requirements by the industry. Subsequently, the graduates

are facing problems in gaining a place in a working world, as they are not able to compete and give

a full commitment to a work. This matter is regretted because the inability for the Malaysian

graduates to fulfill job vacancies in Malaysia resulting in the hiring of foreign workers. Currently, a

good academic achievement is no longer a guarantee for the Malaysian graduates to get a job (Noor

Azina, 2011). It is a benefit for the graduates but it is not a guarantee for them to be given jobs.

Since there is a big gap between the quality levels of the Malaysian graduates with the

international standard, this matter needs to be handled in order to ensure that our country has

skilled, versatile and marketable graduates (10th Malaysian Plan, 2010). Based from a human

capital theory by Becker (1964) it is stated that human capital that has a high knowledge and skills

contribute to the increase of the countrys economic productivity. Becker (1964) also stated that a

high investment in producing useful human capitals is important as long as it give high and positive

impacts to the economic productivity. Therefore this study is conducted to know what causes the

rate of unemployment among graduates in Malaysia so that this problem can be cope by 2020.
1.4 Objectives of the studies

The objectives of this study are divided into two parts which is general objective and

specific objectives. The general objective and specific objective will be identified in the following.

1.4.1 General Objective

The general objective of this research is to study the factors that influence the rate of

unemployment of fresh graduates in Malaysia 2016.

1.4.2 Specific Objective

The rapid increase of graduated workforce, lack of the relationship between educational institutions

and the industry, lack of training for work preparation, rapid increase of the population rate and

rapid decrease of the mortality rate, educational development, economic recession, and capability

and quality of graduates

To identify the rapid increase of graduated workforce will affect the unemployment rate of

fresh graduates in Malaysia.

To identify the negative impact caused by lack of training for work preparation of fresh

graduates with the rate of unemployment in Malaysia 2016.

To identify the rapid increase of the population rate and rapid decrease of the mortality rate

will affect the rate of unemployment of fresh graduates in Malaysia 2016.

To evaluate the effect of educational development with the rate of unemployment in

Malaysia.
 To determine whether the economic recession affects the unemployment among the fresh

graduates in Malaysia 2016.

To measure whether the capability and quality of graduates will affect the unemployment

rate in Malaysia 2016.

1.5 Significant of the Study

The significant of the study is to overcome the increase in rate of unemployment of fresh

graduates in Malaysia year by year. This research also gives a benefit to graduates to find the factor

of unemployment and develop their self in the particular field during job search. Thus this will

increase the productivity and growth of the country.

1.6 Scope and Location of Study

The scope of this study is segmented to the fresh graduates in Malaysia year 2016. To be

specified we will only take count of fresh graduates from ALUMNI UNIMAS for more detailed

information during their job seeking moment. Location will be in Kuala Lumpur as currently we are

limited with resources, time and cost. So Kuala Lumpur will be the perfect location of study as it is

the city centre where graduates from all over Malaysia seeks job.
1.7 Limitation of Study

There were some limitations with respect to the analysis and data that may affect the

accuracy of the results.

Due to sample size, a small sample size has a greater probability that the observation just

happened to be particularly good or particularly bad. Therefore it is harder to find significant

relationships from the data, as statistical tests normally require a larger sample size to justify that

the effect did not just happened by chance alone.

Besides, the questionnaires that fill by respondents would have some bias. It would be more

accuracy if the researcher can interview respondent directly. Furthermore, it would have some

difficulties to approach the respondents because they felt weird upon strangers and give cooperation

to the unknown people.

Moreover, it would be difficult to get the questionnaire all back as some of the respondent

do not realize the important of the research and did not wanted to fill the questionnaire as

respondent though that it is wasting their time.

Finally, cost and time became a heavily limitation to complete this study. Taking a good

respondents sample would have been indeed a costly and time-consuming activity. If cost and time

were allowed to be increase, greater volume of respondents participate in this study and thus the

validity of the result would also increase.