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Market Bytes - September 26, 2022

Graduate hiring in Digital – It’s time to close the gap!

I find the dynamics surrounding pay for Technology and Digitally inclined graduates in Malaysia and other similar emerging markets rather baffling and intriguing in equal measure.

 

Given we regularly hear the term ‘war on talent’ bandied about by employers and recruiters alike and given the attraction and retention of top talent is critical to the future of digital brands in the region, I firstly wonder why employers don’t take a longer term view. Since the difference between a graduate developer, for example and someone with 3 years’ experience is the difference between being completely overlooked, versus companies fighting over you ‘tooth and nail’, I wonder why employers don’t seek to bypass this, by investing in 2-3 year plans to develop grass root talent. A simple switch from reactive hiring to developing a tide of suitable talent coming through the ranks has multiple benefits, which includes nurturing a culture of loyalty versus a transactional, ‘highest bidder wins’ mindset, which is great news for employers and for the market as a whole.

 

What is more intriguing is how graduate salaries evolve based over the course of the early stages of a post graduate’s career. In the 8 years I’ve been in Malaysia, we’ve seen significant inflation in the pay rates of experienced developers with as little as 3 years’ commercial experience. Market rates for a strong developer with this level of experience can be as much as RM10,000, whereas the salary for raw graduates has been stuck at around RM3,000 for this period. On the one hand I would argue this set graduate rate is rather brutal for those graduates tackling an inflating cost of living in Kuala Lumpur – I really don’t know how folks cope. That said, it seems the kiss of experience has a remarkably disproportionate impact on salaries and expectations. Based simply on market dynamics, salaries appear to quite literally double year to year. This seems very difficult to reconcile with the standard market expectation of 25% increments role to role – it seems this is exponential during those critical first 3 to 5 years of a young person’s career in Malaysia. A legitimate concern could be that this sets expectations wrongly as a person’s career develops and their market value in terms of job to job increments tail off.

 

It’s very difficult to explain this disproportionality and my only explanation is that graduate salary expectations are simply an anomaly compared to value. In other words, I feel graduates are rather undervalued relative to potential and this needs recalibrating.

 

Another way to illustrate this is by comparing graduate salaries versus experienced staff members in other parts of the world. For instance, in the UK, a typical developer graduate can be paid as much as 2,000 pounds sterling per month. If we consider what a CTO may get paid with, say 15 years’ experience, we could say 8,000 sterling is about right, meaning over 15 years, we are looking at a four fold increment. Compare this to Malaysia and we are looking at a leap of RM3,000 to RM36,000, which is a twelve fold increment.

 

Now I recognise one of the attraction points of Malaysia is its attractiveness on cost point, but I am not advocating a wholesale shift in cost factor at all. What I am addressing however is the disproportionately low pay to graduates, followed by exponential increments that leads to volatility in the market and negative perceptions and outcomes as a result. If employers would simply lean more into graduate engagement and employment to help solve the talent shortage, supported by a more mid term view and pay more generously to close the gap, this will have a positive knock on effect without shifting the overall cost base of hosting digital operations in Malaysia.

 

Perhaps underlying some of the aversion to hiring graduates and the low rates paid in turn is a trust issue, with a ‘try before you buy’ element, based on how employers perceive the quality of graduate output, which is a whole additional matter to be addressed with the tertiary education system. However, based on my experience of working with graduates here in Malaysia, there are plenty of positives to work with and it simply takes the right investment in onboarding and training and development to bridge the gap.

 

As final food for thought, when it comes to highly technical skill sets like software engineering, surely the number of years experience is hugely arbitrary. The passionate developer probably picked up this fine art from a very young age and by the time of graduation is fluent in a number of technology frameworks. The highly talented newbie therefore can often be more productive than the average coder with 5 years experience, which creates more concerns surrounding the graduate salary dissonance issue.