Monday, December 24, 2018

A suggestion to create jobs for young people

Someone said that Malaysia faced a big problem of the unemployed graduates. They have to deal with this problem before adopting other economic stimulus measures.

I agree with this view.

However, I must point out that Singapore and many other countries also face this problem. Some countries had tried to solve this problem for more than a decade, but they were not successful.

Let me first give my view of the underlying cause.

It is due primary to the failure of the "free market system". The free market did not identify the problem and could not offer a solution. The situation was allowed to deteriorate for many years and got worse.

The solution is - government intervention.

I know that many people do not agree with me. I still want to say my piece. And I tell these people to give their view, and not to brush me off with "true economics" or other
"conventional wisdom". We had relied on these measure for decades and they did not work, right?

What caused the problems in the first place? Here are my observations:

a) They are many jobs that the young people do not want to do. These jobs pay low wages. Foreigners come in to do these jobs.

b) The young people want to become graduates, hoping to get better paying jobs. But there are too many graduates, relative to the real demand for them.

What government intervention is required? These are the steps that need to be taken:

a) Raise the wages of the low paying jobs, so that the locals are willing to do them. They do not need to pursue a degree at great cost and could not get a job on graduation. It is necessary to set the minimum wage for various kinds of jobs. These minimum wage should be adequate to meet the cost of living. The govt may need to provide wage subsidy for small employers to meet the higher costs.

b) The public sector should set an example to pay proper wages and terms of condition. These jobs should not be outsourced. They should provide the benchmark for jobs in the private sector.

These measures require the government to have adequate revenue to pay the cost. I am in favor of the government collecting more revenue, so that they can take the necessary steps.

I support the following measures to raise the revenue of the government:

a) Introduce a development charge for the develop of properties. This is an efficient form of revenue. It will raise the cost of properties, but the economy can adjust to the higher cost (but it should not be pushed too much).

b) Introduce tariffs on imported goods and levy higher tax on car ownership.

With these revenue measures, the government need to rely less on income tax (which can be avoided) or on GST (which adds cost to business and is regressive).

My suggested measures will increase the cost of living for ordinary people. But the ordinary workers will enjoy higher wages to meet the higher cost, and still have more money to spend.

More importantly, the younger people will be employed, rather then unemployed.

My suggestion is not for Malaysia alone, although it was the start of the conversation.

Many countries, including Singapore, face the challenge of unemployed young people. They also need to find a solution.

Tan Kin Lian

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