TRAGEDY OF THE ANTICOMMONS - JOBLESS GRADS IN MALAYSIA

Tragedy of the anticommons: Jobless Graduates in Malaysia

The Agriculture and Agro-based Industry Minister Tan Sri Muhyiddin Yassin said that unemployed graduates were not interested in agriculture. “The question of graduate unemployment among graduates will not arise if they opt to do short-term courses or studies in this field,” he said. The minister estimated that in five years, close to 500 experts would be needed in agricultural research institutes, adding that Malaysia could not continue to rely on foreign expertise. Further, Tan Sri Muhyiddin said the participation of local graduates was vital to boost the agriculture sector, which was the third biggest contributor to the gross domestic product (GDP) after manufacturing and services. He said his ministry had allocated an initial RM9mil to revive the unemployed graduates training scheme but it was not well received.

This is a classic example of the tragedy of the anticommons occurs when the graduates as rational individuals (acting separately) collectively waste a given agricultural resource or opportunity by under-utilizing it. This happens when too many individuals have rights of exclusion in a perceived scarce resource.

Over the past thirty years, macroeconomists thinking about aggregate labour market dynamics have organized their thought around two relations, the Phillips curve and the Beveridge curve.

Labour markets in most developed countries are characterized by huge gross flows. In Malaysia, hundreds of workers may have moved either into or out of employment every month. While that movement could be consistent with workers reallocating themselves across a given set of jobs, recent evidence by economists suggests that these flows are associated with high rates of job creating and job destruction in the context and pretext of defining “K-workers for the K-economy.” From a macroeconomic viewpoint, the Malaysian labour market is highly effective in matching workers and jobs, yet those flows are so large that they imply the coexistence of unfilled jobs and unemployed workers.

Examination of the joint movement of graduate unemployment and vacancies can tell us a great deal about the effectiveness of the job matching process, as well as about the nature of shocks affecting the labour market. In this article, we first develop a conceptual frame in which to think about gross flows, about the job matching process, and about the effects of shocks on graduate unemployment and vacancies. We then turn to the empirical evidence, using data for the unemployed graduates in Malaysia. We focus first on the job matching process, estimating the "matching function," the aggregate relation between graduate unemployment, graduate vacancies, and graduate new hires. We then interpret the Beveridge relation. More precisely, we look at the joint behavior of graduate unemployment, general employment, and vacancies, and infer from it the sources and the dynamic effects of the shocks that have affected the graduate labour market over the past few years.

PHILLIPS CURVE-BASED ANALYSIS

In a stable macro-economic environment, it is the norm that a NAIRU (non-accelerating inflation rate of unemployment) type Phillips curve relationship holds – in the longer run, the Phillips curve becomes vertical, and in the short run, the expected rate of inflation, supply-demand gaps and supply shocks determine the inflation rate.For the case of Malaysia, many graduate vacancies in the agriculture sector have yet to be filled as most unemployed graduates regard it as a “last resort” area for jobs. But of course, we do have isolated cases of marine engineers working in Felda schemes managing boilers instead of engaging themselves supposedly at the local shipyards.

For the Malaysian jobless graduates, these scarce resources are job opportunities that match with their competencies which can be construed as “low hanging fruits.” This paradoxical situation (the "anticommons") is contrasted with a commons, where too many individuals have privileges of use (or the right not to be excluded) in a scarce resource. The tragedy of the commons is that rational individuals, acting separately, may collectively over-utilize a scarce resource. The term "tragedy of the anticommons" was originally coined by Harvard Law professor Frank Michelman and popularized in 1998 by Michael Heller, a law professor at Columbia University.

Both scenarios look pretty mind-bending when the concepts are applied to the case of unemployed graduates in Malaysia. For instance, Cyberspace was once thought to be the modern equivalent of the Western Frontier, a place, where land was free for the taking, where explorers could roam, and communities could form with their own rules. It was an endless expanse of space: open, free, replete with possibility. This is true no longer. We can argue that we are enclosing cyberspace, and imposing private property conceptions upon it. As a result, we are creating a digital anti-commons where sub-optimal uses of Internet resources is going to be the norm and neglecting the other reality frontiers, such as the abundant of opportunities in the agricultural sector, that were once the engines for the economic growth for Malaysia.
JOBLESS GRADUATES AND PRIVATIZATION: Modern equivalent of Tragedy of the Anticommons in Malaysia
Privatization is frequently associated with industrial or service-oriented enterprises, such as mining, infra-structure, manufacturing or power generation, but it can also apply to any asset, such as land, roads, or even rights to water. Water is an abundant substance in Malaysia and it exists in many forms, such as rivers, streams, waterfalls, lakes, rains and sea. In recent years, government services such as health, public roads, public communication systems, sanitation, and education have been particularly targeted for privatization in many countries.
The basic argument given for privatization is that governments have few incentives to ensure that the enterprises they own are well run and can actually create job opportunities especially for the graduates. On the other hand, private owners, it is said, do have such an incentive: they will lose money if businesses are poorly run especially when they have excesses of manpower. The theory holds that, not only will the enterprise's clients see benefits, but as the privatized enterprise becomes more efficient, the whole economy will benefit especially in terms of job creation. Advocates of privatization argue that government run businesses failed to create more jobs because of the following reasons:
They may only be interested in improving a company in cases when the performance of the company becomes politically sensitive.
Conversely, the government may put off improvements due to political sensitivity — even in cases of companies that are run well.
The company may become prone to corruption. The government may seek to run a company for social benevolent goals rather than business ones (this is conversely seen as a negative effect by critics of privatization).
It is claimed by supporters of privatization, that privately-held companies can more easily raise capital in the financial markets than publicly-owned ones.
Governments may "bail out" poorly run businesses with money when, economically, it may be better to let the business fold.
Parts of a business which persistently lose money are more likely to be shut down in a private business thus it is has to resort to retrenchments and optimization.
Nationalized industries can be prone to interference from politicians for political or populist reasons. Such as, for example, making an industry buy supplies from local appointed producers, making it compulsory to have at least 30% local contents, when that may be more expensive than buying from abroad, forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce graduate unemployment, or moving its operations to marginal constituencies; it is argued that such measures can cause nationalized industries to become uneconomic and uncompetitive.
In particular, the first and last reasons are held to be the most important because money is a scarce resource when compared to humans: if GLCs losing money, or if they are not as profitable as possible, this money is unavailable to other, more efficient firms. Thus, the efficient firms will have a harder time finding capital, which makes it difficult for them to raise production and create more employment for human resources.
Another argument for privatization is that to privatize a company which was non-profitable (or even generated severe losses) when state-owned means taking the burden of financing it off the shoulders and pockets of taxpayers, as well as free some national budget resources (that include human resources) which may be subsequently used for something else. Especially, proponents of the laissez-faire capitalism will argue, that it is both unethical and inefficient for the state to force taxpayers to fund the business that can't work for itself. Also, they hold that even if the privatized company happens to be worse off, it is due to the normal market process of penalizing businesses that fail to cope with the market reality or that simply are not preferred by the customers.
GRADUATE UNEMPLOYMENT - macroeconomics
In economics, a person who is able and willing to work yet is unable to find a paying job is considered unemployed. The graduate unemployment rate is the number of unemployed workers divided by the total civilian labour force, which includes both the unemployed and those with jobs (all those willing and able to work for pay). In practice, measuring the number of unemployed workers actually seeking work is notoriously difficult. There are several different methods for measuring the number of unemployed workers. Each method has its own biases and the different systems make comparing graduate unemployment statistics between countries, especially those with different systems, difficult. However, the meaning of graduate unemployment rate for those affected means different things in different countries (depending on their institutions), so we should be careful in interpreting this contrast in the case of jobless graduates in Malaysia.
Some of the likely costs of graduate unemployment for society include increased poverty, crime, political instability, mental health problems, and diminished health standards. Understanding the forces that create graduate unemployment, and then trying to mitigate their negative effects to the greatest extent possible, is a central issue in economics.
Joblessness can hit individual job-seekers hard. Lacking a job often means lacking social contact with fellow employees, a purpose for many hours of the day, and of course, the ability to pay bills and to purchase both necessities and luxuries. This last is especially serious for those with family obligations, debts, and/or medical costs, especially in a country such as Malaysia, where the affordability of decent living is often linked to holding a job.
Another cost for the unemployed graduate is that the combination of graduate unemployment itself, lack of financial resources, and social responsibilities may push unemployed graduates to take 3D jobs that do not fit their skills or allow them to use their talents. That is, graduate unemployment can actually caused underemployment.
Second, unemployment among graduates makes the existing employed workers who are not compatible with the so-called definition of “K-worker in K-economy” more insecure in their jobs, worrying about being replaced. Finally, the existence of significant graduate unemployment raises the monopsony power of one's employer: that raises the cost of quitting one's job and lowers the probability of finding a new source of livelihood especially for the existing workforce.
Finally, high graduate unemployment implies low real Gross Domestic Product (GDP): we are not using our resources as completely as possible and are thus wasting our opportunities to produce goods and services that allow people to survive and to enjoy life. Much graduate unemployment — called deficient-demand or cyclical graduate unemployment — thus represents a profound form of inefficiency, sometimes called "Keynesian inefficiency."
Some say that slow economic growth and the resulting graduate unemployment are actually good, since the constantly needed growth of the GDP cannot be sustained forever, given resource constraints and environmental impacts. But others ask if it is fair to burden the unemployed (usually those at the bottom of the economic heap) with the costs of limiting the use of resources and the abuse of the environment. This suggests that we should seek ways to improve the efficiency of our human resource management and other resources or environmental stewardship to attain growth and low graduate unemployment in order to make sure that the burdens are distributed fairly.
CAUSES OF GRADUATE UNEMPLOYMENT IN MALAYSIA
Open graduate unemployment of the sort defined above is associated with capitalist economies. Preliterate ("primitive") communities treat their members as parts of an extended family and thus do not allow them to be unemployed — in the effort to preserve the group. In pre-capitalist societies such as European feudalism, the serfs (though clearly dominated and exploited by the lords) were never "unemployed" because they had direct access to the land (and the needed tools) and could thus work to produce crops. Just as on the American frontier during the 19th century, there were day labourers and subsistence farmers on poor land, whose position in society was somewhat analogous to the unemployed of today. But they were not truly unemployed, since they could find work and support themselves on the land.
There is considerable debate amongst politicians, academics and economists in Malaysia as to what the main causes of graduate unemployment are. Keynesian economics emphasizes graduate unemployment resulting from insufficient effective demand for goods and service in the economy (cyclical graduate unemployment). Others point to structural problems (inefficiencies of profiling and job matching process) inherent in labour markets (structural graduate unemployment). Classical or neoclassical economics tends to reject these explanations, and focuses more on rigidities imposed on the labour market from the outside, such as minimum wage laws, taxes, and other regulations that may discourage the hiring of workers (classical graduate unemployment). Yet others see graduate unemployment as largely due to voluntary choices by the unemployed (frictional graduate unemployment). For the others, they see graduate unemployment as a structural fact helping to preserve business profitability and capitalism. The different perspectives may be right in different ways, contributing to our understanding of different types of graduate unemployment. This explains why it is difficult to establish the current jobless graduate actual figure whether it is 81,000 or the mirror-image 18,000?
JOBLESS GRADUATES AND ECONOMIC RATIONALISM
Economic rationalism is a term in macroeconomics, applicable to the economic policy of many governments around the world, in particular during the 1980s. The origins of the term are unclear however it is likely that they relate to the works of the English philosopher John Stuart Mill (1806-1873) and his treatise on economic thought and the contrast between Rationalism and Romantacism. To a large extent the term merely means economic liberalism. Economic rationalism can have positive results when the 'self-interest' is considered as the financial wellbeing of society at large. This financial wellbeing may however be at the expense of environmental and cultural considerations. Economic rationalism is economic policy without social moral consideration, or "the view that commercial activity ... represents a sphere of activity in which moral considerations, beyond the rule of business probity dictated by enlightened self-interest, have no role to play." (Quiggin 1997)
As Margaret Thatcher famously said, "There is no such thing as society. There are individuals, and there are families." Which makes one wonder: what is it, precisely, that all of us as responsible citizens should do to help in resolving the issue of unemployed graduates rather than waiting for our beloved Prime Minister, YAB Dato’ Seri Abdullah Hj Ahmad Badawi to come out with the final solutions? The onus is not on the employers or the higher education institutions BUT all Malaysians.

Written by:
Dr. Ismail Ab Jamal
Member of Corporate Membership Committee
WIM