ASEAN’s Ticking Time Bomb – KSInsights May 2024

Published on 05 Jun 2024

While in Jakarta over the weekend, I was struck by a headline in The Jakarta Post: “With 10 million jobless youths, Indonesia’s demographic dividend is at risk.” The article highlighted the plight of Benedictus, a 23-year-old IT graduate unable to find employment due to a skills mismatch—a common issue across the region.

Just days ago, I addressed 150 emerging leaders in Malaysia, participants of the Malaysia Future Leaders School, a program under the Prime Minister’s Department. I recounted the story of Aina, a Malaysian chemistry graduate who ended up working as a cashier at a fast-food chain. Her story went viral on TikTok in 2022, and by 2023 she was promoted to assistant manager. This, however, underscores the underemployment crisis—Aina’s qualifications far exceed her job role.

The room fell silent as I shared Aina’s story, underscoring the dire situation. Youth unemployment in ASEAN averages around 10-15%, but the bigger issue is underemployment, for which reliable data is scarce. This is a ticking time bomb with potential to devastate economies, leading to lower tax revenues, increased appeal of far-right populism, and widespread mental health issues. We risk creating a lost generation, much like what happened in parts of Europe.

With 11 years of experience in tackling youth unemployment through capacity building and writing extensively on the issue, I’ve seen the problem worsen. Causes are multifaceted: skills mismatch between academia and industry, inadequate education and training, and a preference for gig jobs among some youths. Recently, AI has added to the anxiety, with some attributing job losses to technologies like ChatGPT, though evidence remains inconclusive.

Traditional policy prescriptions include upgrading technical and vocational education and training (TVET), enhancing entrepreneurship education, and fostering better collaboration between academia and industry. However, it’s time for a more radical approach: a job guarantee program. The idea is simple: if you want a job, the government will provide one.

Such programs would be federally funded but locally administered through a “job bank” system. Jobs could range from public facility maintenance and reforestation to childcare, youth social work, and elderly healthcare support. These roles typically fall outside the private sector’s remit, avoiding market crowding. The program would offer a living wage with social security, potentially pressuring the private sector to improve salaries.

In a previous article, I estimated the cost of a job guarantee in Malaysia: a monthly salary of RM2,500 plus RM500 for training, covering 600,000 unemployed persons, would amount to RM21.6 billion—about 5.5% of the 2024 Budget. Though not cheap, its economic impact could be transformative, effectively eliminating youth unemployment. This challenges the orthodox economic notion of a “natural rate of unemployment”—we don’t accept a small percentage without healthcare or education, so why accept it for employment?

This approach surpasses wage subsidies or unemployment benefits. Some may see it as reminiscent of Soviet-era communism, but similar programs have been implemented successfully: India’s National Rural Employment Guarantee Act, Austria’s successful Marienthal experiment, Argentina’s Plan Jefes y Jefas, and South Africa’s Expanded Public Works Programme (EPWP).

It’s time to think boldly: an ASEAN Job Guarantee could potentially eliminate youth unemployment. This isn’t a silver bullet or a primary policy tool, but the government should seriously consider its role as an employer of last resort. By stepping in to provide jobs when the private sector cannot, governments can ensure that everyone willing to work has an opportunity.

Returning to the Malaysia Future Leaders School, the young participants looked terrified at the grim statistics. However, I emphasised that every crisis brings opportunity. The economic centre of gravity is shifting from the West to Southeast Asia, with emerging sectors like ageing, green, and digital economies poised to create jobs for young people.

Ignoring this ticking time bomb is not an option. We cannot risk the futures of Aina, Benedictus, and countless others.


Date

05 Jun 2024