Human Capital and Youth Labor Dynamics in Malaysia: A 33-Year Econometric Perspective
DOI:
https://doi.org/10.65820/ejems-3vol2-issue2-2026Keywords:
Labour Force Participation, Human Capital Development, Time-Series Econometrics, Malaysia Labour Market, ARDL ModelAbstract
Purpose: This study examined the dynamic relationship between educational attainment and youth labour force participation in Malaysia from 1991 to 2023 using macroeconomic time-series analysis. Despite substantial expansion in secondary and tertiary education, youth labour force participation declined by over 10 percentage points, indicating an education-employment disconnect.
Methods: Augmented Dickey-Fuller tests assessed stationarity, followed by the Autoregressive Distributed Lag (ARDL) bounds testing approach to estimate long-run and short-run relationships. Structural break tests identified major shifts in the education-employment relationship.
Results: A stable cointegration relationship was found among youth labour force participation, intermediate education, GDP per capita, and poverty. Intermediate education had a significant positive long-run effect (β = 0.52, p < 0.05), whereas advanced education was insignificant. In the short run, GDP per capita positively influenced participation (β = 0.68, p < 0.01), while poverty had a negative effect. The error correction term (–0.43, p < 0.01) indicated moderate adjustment to equilibrium. Structural breaks in 1997, 2008, and 2020 corresponded to major economic crises that weakened youth labour market integration.
Novelty and Contribution: The study challenges the assumption that expanding educational attainment alone improves youth employment. It demonstrates that macroeconomic conditions and structural disruptions shape education-to-employment outcomes, highlighting the need for complementary labour market reforms.
Social and Practical Implications: The findings support strengthening TVET, aligning curricula with labour market needs, expanding youth employment programmes, and improving policy resilience to economic shocks to facilitate smoother school-to-work transitions and reduce youth labour market disengagement.
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Copyright (c) 2026 Blessing Ginika Nkwusi, Ismi Arif Ismail, Dr. Suriani Ismail (Author)
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This article is licensed under a Creative Commons Attribution 4.0 International License.
