Young, educated and jobless

This statement is wrong. The 41.6% cited in the article is the proportion of employed residents aged 20-29 who are degree holders — not the employment rate.

In fact, the same Ministry of Manpower (MOM) report stated that 84.4% of resident degree holders aged 20-29 were employed in 2018. As for the remainder, a significant proportion is economically inactive. The unemployment rate of resident degree holders aged 20-29 was 7.3% in June 2018. Like most countries, the youth unemployment rate in Singapore is also higher than the overall unemployment rate, because of the higher job search activities of the young.

The Edge also erroneously stated that “the ratio of job vacancies to unemployed persons is 1:1.08, indicating that there are more job seekers than positions available”. To the contrary, MOM’s 1Q2019 labour market statistics showed that the ratio of job vacancies to unemployed persons was 1.08:1, meaning there are more positions available than job seekers.

Thank you.

This statement was jointly issued by The Ministry of Education and Ministry of Manpower

Young, educated and jobless

As macroeconomic conditions worsen, fresh graduates are struggling to find work. Structural issues in Singapore’s economy portend a long road ahead.

SINGAPORE (July 1): Seven years ago, 26-year-old Deborah Wong decided to pursue a degree in economics at the Singapore Management University (SMU), confident that it would land her a coveted job in the banking sector. However, she was mistaken. Wong did manage to secure a one-year contract at a local bank immediately upon graduation in 2016, only to be retrenched three months later, as the team was downsizing. Since then, she has been having difficulty finding a job that matches her skills, and is currently working part-time as a retail assistant at a cosmetics and skincare company.

“Yes, I am sad that I am not doing a job that matches my qualifications,” Wong tells The Edge Singapore. “I hope I can find a more permanent role soon, but it’s so hard. I have sent out close to 30 applications to banks, MNCs and government agencies. Some have called me for interviews, but I have not been offered anything yet.”

Wong is not alone in her job-hunting. A graduate from the National University of Singapore (NUS) who only wants to be known as Smita also had tremendous difficulty finding a job. She graduated with a degree in life sciences in 2014, but went back to school to pursue a master’s in management a year later because she just could not find a job related to her field of study. Now, nearly a year after finishing her postgraduate course, Smita is giving tuition in mathematics and science to students aged 12 to 18. “I thought furthering my studies would give me more opportunities, but it has still been hard. Employers seem to value job experience over academic qualifications, so I have not received many responses. The two offers I received required me to accept a salary below $3,000, which I was not comfortable with,” says Smita, who hopes to work as a researcher in the science and technology industry.

Both Wong and Smita are part of a rising number of degree holders below the age of 30 who are finding it difficult to secure full-time, permanent employment. The first quarter labour market numbers released by the Ministry of Manpower (MOM) show that the overall unemployment level, as at March 2019, had edged up to 2.8%, from 2.7% a year ago. With 5.2% of individuals below the age of 30 (15-29) unemployed, the age group has the highest unemployment level. The unemployment figure for individuals in their 30s was 2.1%, and 2.5% for older people. Overall, across the age groups, 2.7% of degree holders were unemployed.

In 2018, 149.4 residents out of 359.4, or 41.6% of degree holders between the ages of 20 and 29, were employed. This translates into roughly 58% of university graduates who were unemployed. While this statistic may be due to the pursuit of higher education or alternative careers such as entrepreneurship, experts agree that there is a large proportion of young and educated individuals who are just not able to secure a job — whether permanent or temporary.

Now, there is even an acronym for this group of people: Neets, or Not in education, employment or training. The latest available data on these individuals — from the National Youth Survey in 2016 — shows that there are 20,100 Neets here, making up 4.1% of the resident youth population. In 2013, there were 19,700 Neets, comprising 3.7% of the resident youth population.

With the number of Neets on the rise, policymakers will be under pressure to find solutions to address their inability to secure a job.

Structural problem

Data from MOM for 1Q2019 shows that the ratio of unemployed persons to job vacancies is 1:1.08, indicating that there are more positions available than jobseekers. This is down from the 1:1.10 ratio recorded last December, as 10,700 new jobs were created in 1Q. Yet, why is it that fresh graduates seem to be having a harder time than others in securing employment? Are they, the so-called “strawberry generation”, being too picky? Is it just a cyclical issue, owing to the current uncertainties over the health of the global economy, which is exacerbated by geopolitical tensions? Or, is it a consequence of a deeper, structural problem in Singapore’s economy?

Unemployment tends to be either frictional, cyclical or structural. The time lag taken by the jobseeker to find a job and the employer to find a suitable match is seen as frictional unemployment. Cyclical unemployment, on the other hand, occurs when there are not enough jobs to go around. Structural unemployment arises when jobseekers and job vacancies co-exist, without being matched over a long period of time. This could be due to a mismatch between the requirements of the economy and what the jobseeker can offer.

In the case of Singapore, the simple, broader issue is an older workforce that is staying in place for longer. As the government gradually increases the retirement age and as the cost of living rises, people are staying in their jobs and preventing a younger set from taking over.

To David Ang, former executive director of the Singapore Institute of Human Resources, the current unemployment trend is a structural problem. “There are jobs, but they are in retail, construction and community services and are not likely to be on a permanent basis. So, they may not be what fresh graduates want to take,” he notes.

However, Irvin Seah, senior economist at DBS Bank, thinks the problem is circumstantial, given the issues facing the global economy. “Usually, the employer will take a more cautious approach in terms of hiring. Even when you see the cycle turning up, the hiring manager will tend to take a more reactive approach in hiring. They will wait and see, depending on whether they see improvements in their earnings and business before they consider increasing their headcount,” he says.

Fresh grads are more vulnerable in such situations and face the most difficulty in getting jobs because of their lack of work experience. Seah expects the down cycle to persist and, at best, plateau in the long term. Crucially, he also sees a broader shift that could affect more graduates, as jobs are being made redundant as a result of, for instance, the introduction of new technologies. “If your degree is gearing you in that direction, then you will be affected,” he says.

To be sure, Singapore’s youth unemployement rate is not unusual. Data released by the International Labour Organization (ILO) shows that the unemployment rate among youth (defined as persons between 15 and 24) has gone up from 2015 to 2018. This is despite the increasing literacy rate among the younger generation. Statistics from the World Bank shows that as at 2016, some 91.3% of youth were literate.

In addition, 2.09 youths are unemployed for every unemployed adult — an indication of employers’ preference in hiring more experienced individuals.

Seah says with expectations of a recession, “everything will basically be pointing southwards except for retrenchments, which will go north”. He adds: “I don’t think we are at that stage yet. But, so long as the ongoing trade dispute between the US and China persists, obviously the risk of that happening will increase.”

Kelvin Seah, an economics lecturer at the National University of Singapore (NUS), agrees. He notes that, given Singapore’s heavy reliance on trade, “companies [are] likely looking to offer fewer full-time permanent positions and [will instead] offer more temporary and part-time employment positions as a way to hedge against the growing uncertainty”. One such segment is the services industry, which, excluding foreign domestic workers, grew 13.6% y-o-y in 1Q2019 compared with 18.2% in 4Q2018.

Misaligned expectations?

Ang says often, fresh graduates have unrealistic expectations, which may be a result of various job market surveys, including those conducted by universities, that quote excessively high starting salaries for graduates. For instance, business graduates from SMU are said so have average starting salaries of $3,600. The faculty has the biggest cohort among all the other six programmes offered by the university. “This creates the impression that they should get a certain salary upon graduation, and when they don’t, they are reluctant to take on the job,” he says.

DBS’s Seah adds that the rising cost of living has pushed wages up. However, given the struggles facing companies, “the market is obviously not prepared to pay that kind of higher wages because now you have to face competition not just from foreigners but also from technology”.

With the number of available jobs not increasing in tandem with the rising number of graduates produced each year, Ang suggests that this “false sense of expectation sees the young and ambitious local graduates losing out to foreigners, who are more realistic and do not expect a high salary but are more keen on landing a job for the experience”. To be sure, with the government tightening the quota on S-passes, or work visas given to foreign employees with a salary of $2,300, there has been a decline in the number of such employees — from 192,300 registered in December 2016 to 185,800 in December 2018.

Still, Ang says fresh graduates should manage their expectations. “Be realistic, do not be fooled by the mirage of data constructed to give the impression of higher salary. Do your homework, get a part-time, project-based job in an industry that you are keen to learn more about and explore more opportunities,” he counsels.

Feon Ang, Asia-Pacific vice-president for talent and learning solutions at networking platform LinkedIn, says jobseekers need to be able to adapt to changes in the economy and be ready to work in sectors unrelated to their field of study or training. She tells The Edge Singapore how she switched from a marketing role to another role in a technology company, because “that was where the economy was headed”. “It is important to be aware of and intentional about your own learning and development. Think outside the box and do not be fixated. Challenge yourself to do new things,” she says.

She adds that jobseekers should work on soft skills such as critical thinking, leadership and creativity to make themselves more marketable in the constantly evolving workforce.

Competing globally

At a recent pre-university seminar, Singapore’s Deputy Prime Minister Heng Swee Keat encouraged the young audience to seize opportunities in a fast-growing Asia. Citing figures that make the region stand out globally in terms of growth potential, Heng said: “The next wave of opportunities will be in Asia, and in our Asean region, and Singapore is well-positioned to seize these opportunities.”

Observers such as DBS’s Seah says young graduates here could get a headstart in their careers by gaining experience from working abroad. “This is not a matter of brain drain, but getting international exposure,” he points out, adding that opportunities can be sourced in Singapore-headquartered companies with operations abroad.

However, what is also evident from Heng’s speech — particularly that Southeast Asia has a young and growing population of more than 600 million people — is that young people in Singapore will face competition in a much bigger field. Indeed, data from CEIC shows that in 2017, unemployment rates were high in other Asean countries, standing at 5.3% in Indonesia, 5.7% in the Philippines, 2.3% in Vietnam and 3.4% in Malaysia. Thailand was the only exception, with an unemployment rate of 1.2%.

NUS’s Seah says pursuing further education might be a viable option that will help insulate people from adverse labour market shocks. “It equips individuals with the skills and knowledge to take on new job functions and seize emerging employment opportunities, which may arise as a result of changes in technology and innovation. If a graduate is already facing unemployment or retrenchment, the opportunity cost of pursuing further education would be even lower since less is sacrificed in terms of forgone earnings from returning to study.”

Domino effect

So, are university graduates being unrealistic in their expectations?

“The world has changed and times have changed. It’s no longer what it used to be when our parents told us to study hard, get a good degree, get a good job and you are set for life. That no longer applies. There is little room for complacency and our younger generation really need to [work harder] to bring out the hunger in them,” DBS’s Seah muses. “It’s not just in terms of getting a job; people must consider the option of creating their own opportunities.”

But with many young people scrambling to secure internships at well-known organisations both at home and abroad even before finishing university, or juggling various community service projects and leadership positions to make themselves more attractive to employers, it is hard to believe that young people want too much or are not making enough effort to secure jobs.

Whatever the reason, a rising youth unemployment rate spells trouble for the Singapore economy, particularly against the backdrop of an ageing population. With young people getting a slower start in life, they are likely to generate lower lifetime earnings, which would in turn affect their retirement funds. Meanwhile, with fewer entrants into the workforce, who would be expected to contribute incrementally higher taxes as their career progresses, there is likely to be a contraction in tax collection.

On the other hand, a growing number of senior citizens are going to require more support — in terms of healthcare and living allowances. This support comes from the government or younger family members; either way, it requires the younger generation to have secure and improving livelihoods. NUS’s Seah says: “Society as a whole may be negatively impacted [by youth unemployment] since others in society may have to be burdened with higher taxes in order to support those on welfare programmes as a result of not being able to save enough for retirement.”

DBS’s Seah reckons that the government’s efforts to help the older generation with expenses, such as the Merdeka generation package, also “lightens the burden of the current generation”. However, these initiatives are temporary, stop-gap measures that may mask a bigger problem.

Much has been done over the last five years to help older workers stay employed. These include the formation of the Workforce Development Agency and the introduction of the SkillsFuture scheme aimed at promoting adult learning. Under the scheme, all Singaporeans are given an initial credit of $500 to be used for training and courses; additional subsidies are extended to workers aged 40 and above.

What is needed now are measures to create opportunities to increase young people’s participation in the labour force. After all, not only will the younger talent be able to contribute to economic growth, they can also inject much-needed diversity of ideas and experiences into businesses. More importantly, remaining unemployed or being unable to find suitable, stable work has detrimental effects on an individual, and impedes their ability to contribute to the workforce in the longer term.