Page 187 - Contributed Paper Session (CPS) - Volume 8

CPS2232 Syafawati A. R. et al.
in the 1973. However, there is very few studies regarding underemployment
in Malaysia’s labour market. Due to the difficulty in measuring
underemployment by conventional means, this very useful indicator are not
usually reflected in national published data in some developing countries
including Malaysia. Malaysia relies solely on unemployment rate as the key
indicator of the well-being of the labour market and economic growth. As
noted by Sengenberger 2011, the unemployment rate tends to either over-
estimate or under-estimate the true magnitude of labour force
underutilization or underemployment. Thus measuring and distinguishing
underemployment from full employment and unemployment is crucial in
determining the efficiency and effectiveness of Malaysia’s labour market.
The criterion recommended by ILO in measuring underemployment is by
using three approaches: a) time spent in gainful activity; b) income earned
from the activity; and c) skill are underutilized. The main purpose of this study
is to identify the most suitable method to measure underemployment in
Malaysia’s labour market. This study compares three approaches
recommended by ILO based on data availability and practicality of Malaysia’s
labour market. The method suggested by this study can be used by the
government for policy formulation and monitoring the national economic
performance and social development.

2. Methodology
The objective of this study is to identify the most suitable method to
measure underemployment in Malaysia’s labour market. This study explores
the data from Labour Force Survey (LFS) and Salaries & Wages Survey between
year 2010 and 2017.
According to Resolution Concerning the Measurement of
Underemployment and Inadequate Employment Situations, adopted by the
Sixteenth ICLS (October 1998) there are three conditions of underemployment
or inadequate employment situations that need to be consider:
a) Skill-related Inadequate Employment
Skill-related inadequate employment is characterized by inadequate
utilization and mismatch of occupational skills, thus signifying poor
utilization of human capital. Persons in this form of inadequate
employment may be understood to include all persons in employment
who during the reference period wanted or sought to change their current
work situation in order to use their current occupational skills more fully,
and were available to do so.
Skill-related inadequate employment is measured as the number of
employees with formal education of Diploma or higher working in a semi-
skilled or low-skilled occupation. Skill levels of occupation were classified
based on Malaysia Standard Classification of Occupation (MASCO) 2013

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