Youths trapped in debt by unemployment, low pay, says economist

 

Credit card debt and personal loans are among the reasons why many youths become bankrupt, says youth and sports minister Hannah Yeoh.

PETALING JAYA: Unemployment and low pay are the two main reasons why young Malaysians are falling into bankruptcy, an economist said, citing two studies released last year.

Geoffrey Williams of the Malaysia University of Science and Technology said the Labour Market Review Q4 2022, and the Salaries and Wages Survey Report 2022 showed that total unemployment for those aged 25 to 34 stood at 32%.

The average income for those in the age bracket stood at RM2,053, which was below the living wage, with some earning less than RM2,000, he said.

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Williams said that taking into account inflation, the living wage for an individual based in Kuala Lumpur in 2023 should be around RM3,089. For couples, the rate would be RM5,149.

Geoffrey Williams.

“High debts accumulate due to low income and unemployment,” he told FMT, adding that such groups were more prone to taking bank loans.

“This is not just a problem for young people, but also for families with low incomes. This means young people have to take jobs with low wages to support their families,” he said.

He said students graduating from universities and colleges were also required to pay their loans, but many were unable to do so because of low wages, which further pushed them into debt.

Williams was asked to comment on youth and sports minister Hannah Yeoh’s statement that credit card debt, personal loans, and spending before earning were among the factors that resulted in many youths being declared bankrupt.

Luxurious dreams drive youths to ‘borrowed wealth’

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Nazari Ismail.

Nazari Ismail of Universiti Malaya believes that youths often live beyond their means, desiring a lavish lifestyle, nice accommodation, and expensive cars, which leads them to taking loans.

“Such values are wrong, where people view owning luxury cars and houses and going on expensive holidays as the ultimate signs of success,” he said.

He said youths often get fixated on leading affluent lifestyles as they were influenced by what they perceive from politicians and businesspeople.

Nazari believed a new set of values needs to be developed so that youths realise that being indebted to banks is something they should avoid. - FMT