Impact of Human Capital on Youth Unemployment Rate in Malaysia

Ooi, Lincoln Wei Hung (2021) Impact of Human Capital on Youth Unemployment Rate in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Over the years, the unemployment rate among youth in Malaysia has been on an upward trend which concerns multiple parties as youth are the future pillars of a nation. In light of the pandemic, the issue of high unemployment rate among Malaysian youths has been given even more attention as many youth are facing the issue of unemployment during this devastating period of time. Due to the issue being widely discussed on multiple platforms, it was found to be intriguing which thereby led to the existence of this research study. In short, this study is mainly examining the impact of human capital along with the other two factors which are GDP growth and ICT ability on youth unemployment rate in Malaysia. In this study, a total of 30 years of annual data from the year 1990 to the year 2019 was collected and studied. In terms of the method used to run the tests, Autoregressive Distributed Lag (ARDL) approach was being applied in this study. Diagnostic checking was being performed on the model as well after the ARDL approach being applied. The model has passed all five tests which indicates that the model is free from abnormality distribution, autocorrelation and heteroscedasticity problems. In addition, this model contains parameters that are stable as well. Aside from that, the empirical results also show that human capital and ICT ability are found to have more significant impact on the youth unemployment rate in Malaysia as compared to GDP growth. Since the severity of this issue has seen to be getting even worse year by year, a few policies have been suggested and were listed down in this study for the purpose of curbing the growth of this issue. Multiple parties such as the government and policy makers could be benefited from taking the policies suggested as a reference. Other than the policies recommendation, a few limitations of this study were laid out at the end of the chapter as well.