Factors Affecting Unemployment Rate In Malaysia

This empirical research examined the factors affecting the unemployment rate in Malaysia. The study applied annual time series data from 1982 to 2013. The data on enrollment to tertiary education, inflation, gross domestic product (GDP) and population were tested for unit root using Augmented Dickey Fuller (ADF) test. The results from the ADF revealed that inflation and GDP were stationary at level while unemployment, enrollment to tertiary education and population are stationary at first difference. The Ordinary Least Squares (OLS) were used in the process of estimate the significance
of each variable to unemployment. The main results disclosed that enrollment to tertiary education and inflation have significant effect on unemployment while GDP and population seem insignificant to unemployment. The enrollment to tertiary education, inflation and GDP show negative relationship towards unemployment. Meanwhile, the population impacted positively, thereby increase in population would result in increasing the rate of unemployment. The possible reasons of such outcomes are data constraints and excluding relevant variables. Thus, some recommendations
suggested to future researchers or policymakers are to increase the sample size and use panel data analysis so that further judgment can be made on the validity of research towards various countries other than focusing on Malaysia.
Keywords: Unemployment Rate, Enrollment to Tertiary Education, Inflation, GDP, Population