Over- and Underskilling in the Malaysian Labour Market: Evidence from the 2003 – 2012 Labour Force Survey (LFS)

The purpose of this article is to explore the incidence and the characteristics of over- and underskilled workers in Malaysia across the four Labour Force Survey (LFS) period – 2003, 2006, 2009 and 2012. Using the 1998 and 2008 Malaysia Standard Classification of Occupation (MASCO) of job analysis, of the total 164,896 workers, 66.4%, 13.5% and 20% respectively were classified as adequately-matched, overskilled and underskilled workers. Across year, the incidence of overskilling was lower in 2003 than the rest, around 12%. Underskilled workers were found to be higher than the average level in 2009 (24%) and 2012 (22%). There was no gender difference with respect to overskilled. For underskilled, the incidence was higher (lower) for male (female). Further exploration suggests that being more educated, male, young cohort, Malay ethnic increased the risk of being overskilled whereas underskilled workers were more prone for less educated people, female, non-Malay ethnics and older cohort. It was also considerable variations in overskilling and underskilling with respect to stratum, region, occupation levels, employment status and sector. These findings suggest that mismatch phenomenon seems prolong in the labour market and improving economic performance would reduce the incidence among workers.