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Unlocking the Earning Potential of TVET Graduates

WORKING PAPER 04/23 | 06 APRIL 2023


Posted:
20.05.2023 by Content Admin

Author:
Hawati Abdul Hamid and Tan Mei Yi

Publisher:
Khazanah Research Institute

Year of Publication:
2023

Country in Focus:
Malaysia

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Description

EXECUTIVE SUMMARY

  1. Outcomes of TVET graduates have improved over the years.
    • The GTS data, a survey that basically tracks graduates’ status upon graduation, shows that the graduate employability rate (GE)0F[1] of TVET graduates has increased from 65.5% in 2010 to 87.6% in 2020 and it has exceeded that of non-TVET graduates since 2012.
    • Among graduates considered as “employable”, 75.6% of TVET graduates were already working shortly after completing their studies, in contrast to only 64.0% of non-TVET graduates, on average between 2010 and 2020.
    • Unemployment rates have declined considerably despite staying at double-digits. The percentage of TVET graduates who were not able to secure employment after completing their study went down to 12.4% in 2020, from 34.5% in 2010. The rates are also lower compared to non-TVET graduates since 2012.
  2. TVET and non-TVET graduates face differing circumstances upon graduation.
    • Graduates’ status after attaining a diploma qualification differs between TVET and non-TVET graduates. 63.3% of TVET diploma holders chose to work while 34.9% of non-TVET diploma holders chose to pursue further education or training. Higher working share among TVET graduates could be attributed to the hands-on experience and practical training that they receive, providing them with an edge over those with academic qualifications alone.
    • At the same time, it could also be due to limited options for them to pursue a degree. Broadening opportunities for further studies could enhance outcomes as the study found that graduates’ pay level is strongly linked with their qualification level.
    • Regardless of education track, most unemployed graduates attribute their situation to the competitive labour market.
    • While "awaiting further study offers/results" is the second highest reason cited by TVET graduates, non-TVET graduates often cited "rest or vacation". This underscores the desire among unemployed TVET graduates—who are predominantly diploma holders—to continue learning and enhancing their skills before stepping into employment.
  3. TVET graduates have unique earning potential.
    • Recognising the ongoing concern regarding the low and stagnant starting salary for fresh graduates with the majority earning below RM2,000, this study examines the earning potential of TVET graduates by exploring scenarios that may result in earnings beyond RM2,000
    • Firstly, graduates’ pay level is strongly linked with their qualification level with degree holders exhibiting greater percentages of earning higher. This implies that encouraging graduates to further their studies at higher levels could improve their earning potentials to some extent.
    • Potential of TVET graduates involved in self-employment could be unleashed further to produce higher returns. The percentage of self-employed TVET graduates earning more than RM5,000 is much higher compared to their peers who work in full-time employment, with a greater number of them are diploma holders.
    • Data also indicates that these self-employed TVET graduates are typically involved in manufacturing and construction activities, compared to non-TVET graduates who are more involved in sales and services activities. This underscores the potential of skill-based education in driving entrepreneurship to generate more job opportunities in industrial activities.
  4. Strategies to support graduates earning higher incomes are imperative.
    • Evidently, TVET is performing better than in the past and is becoming more important in providing the manpower needed for economic and social development.
    • Efforts on the supply side to address several challenges faced by the sector such as in terms of quality assurance, governance and misperception have contributed to the positive outcomes.
    • The focus moving forward should also be given on the demand side especially on finding strategies to support graduates in earning higher incomes, thus providing a better return on education investment.
    • Stronger collaboration between TVET institutions and the industry in shaping the curriculum and training delivery is critical so that this workforce can meet the needs of the industries.

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