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Unemployment occurs when a person who is actively searching for employment is unable to find work.
Unemployment is often used as a measure of the health of the economy. The most frequent measure of
unemployment is the unemployment rate, which is the number of unemployed people divided by the
number of people in the labor force.
Unemployment is a key economic indicator because it signals the ability (or inability) of workers to
readily obtain gainful work to contribute to the productive output of the economy.
Frictional unemployment
-Frictional unemployment occurs as a result of people voluntarily changing jobs within an economy.
After a person leaves a company, it naturally takes time to find another job.
Cyclical unemployment
Cyclical unemployment is the variation in the number of unemployed workers over the course of
economic upturns and downturns, such as those related to changes in oil prices.
Structural unemployment
Structural unemployment comes about through technological change in the structure of the economy in
which labor markets operate. Technological changes—such as the replacement of horse-drawn
transport by automobiles or the automation of manufacturing—lead to unemployment among workers
displaced from jobs that are no longer needed.
Institutional unemployment
Institutional unemployment is unemployment that results from long-term or permanent institutional

factors and incentives in the economy. Government policies, such as high minimum wage floors,
generous social benefits programs, and restrictive occupational licensing laws
Unemployment rate is computed by using the formula below:

Chart 1
Malaysia’s unemployment is relatively low and stable at around three percent which means the
population is experiencing close to full employment. The country reached its lowest level of
unemployment in 2014, with a rate of 2.85 percent. Malaysia’s vibrant economy is considered one of
the strongest in South_East Asia. Together with years of political stability, it has been supporting such a
low unemployment rate and good growth rates each year.
Industry has been a strong contributor to GDP and currently provides around 30 percent of employment
opportunities. But even more - about 50 percent - of GDP is generated by the services sector. Given the
country’s strong and growing economy, average GDP per capita is growing at increasing rates as well.
-Optimal Levels of Production
Low unemployment improves efficient use of equipment and resources, which is beneficial to
companies and the overall economy. When businesses operate with full staffs, they generate an optimal
level of products each day. This production efficiency means the company is able to meet customer
demand and maintain good relationships with suppliers and buyers.
- High Consumer Buying Power
Consumer spending impacts the majority of economic growth in the United States. When people have
money to spend, they support the businesses that then hire employees. During a strong economic cycle,
low unemployment essentially feeds itself. Businesses do well because Malaysians have money to
spend.
Chart 2
High unemployment rate was recorded among the population aged 15-19 years that is 15.7 per cent in
2015 and followed by those aged 20-24 years with the rate of 9.3 per cent. However, in terms of
percentage of unemployed persons, the largest contribution was youth age group of 20-24 years that is
42.1 per cent.
News reports state that the number of job seekers and those unemployed – the three percent - are
generally young people, both graduates and non-graduates, who have had trouble entering the job
market. Normally because most of graduates and non-graduates is lack of experience and social skills.
Which make them hard to get a job and adapt to working environment. Some of them also being chossy
in taking job or demanding because of they think their have certificate.
Conclusion
This is called youth unemployment
Recommendation
. Malaysian government is encouraging companies to open up employment opportunities specifically to

young adults.
1. For a start, schools should go back to the basics and concentrate on the three “Rs”—reading,
‘riting and ‘rithmetic. By developing the skills in the three Rs, it will provide great value and
importance to the labour force.
2. tertiary education should not only focus on academic papers but also on industrial training,
communication skills and developing self-esteem in preparing the graduates for the market
needs. Tertiary education should focus on basic business ethics which also sit along the lines of
three “Rs” – respect, responsibility and results. By focusing on the three “Rs”, one can help
reduce the employers’ likelihood of distrust on the quality of the certificate or qualifications and
instead rely on “flags” with regards to the young person’s competencies.
3. Finally, a more integrated system that can provide up-to-date information about economic
growth areas and associated skills as well as details on training options and pathways made
available to young people who wish to pursue particular career options should be good. It is
important to look at the levels of the education system across the board and institute changes
across all levels of the education system so that we can place the right person in the right job.
This is vital because youth unemployment appears to be a structural issue due to skills gap
which is brought about by skills shortages. It is important to start rethinking not only labour
market institutions, but also the traditional education system, and what it means for universities
and apprenticeships in the future.

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Institutional unemployment is unemployment that results from long-term or permanent institutional

Unemployment rate is computed by using the formula below:

-Optimal Levels of Production

- High Consumer Buying Power

This is called youth unemployment

. Malaysian government is encouraging companies to open up employment opportunities specifically to

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