SWRC-UNICEF Policy Paper Series

Wasted Potential: The Economic Case for Educating Non-Citizen Children

Born in Malaysia in an Aging Nation

Many children born in Malaysia to non-citizen parents face systemic barriers to education, legal recognition, and economic participation. Although born on Malaysian soil, prevailing legal and policy frameworks exclude them from accessing fundamental rights, particularly the right to public education. The lack of formal schooling severely restricts their future opportunities, entrenching them in cycles of poverty and informal employment. This exclusion not only constrains their individual potential but also deprives Malaysia of a vital segment of its future workforce—an especially critical loss as the nation confronts accelerating demographic shifts.

Malaysia is experiencing a rapid demographic transition that set to reshape its labour market and long-term economic prospects. The share of the working-age population is shrinking, while the proportion of elderly citizens is increasing at an accelerated pace. By 2050, Malaysia’s oldage dependency ratio will surpass its youth dependency ratio for the first time, significantly raising the economic burden on the workforce. In this context, maximizing labour force participation and productivity is critical to sustaining economic growth. The exclusion of a large segment of the population—such as stateless and undocumented individuals—represents not only a human rights issue but also a missed economic opportunity.

Education is a key driver of economic growth, offering both private and social returns. At an individual level, education significantly enhances earning potential; in Malaysia, a worker with a bachelor’s degree earns 2.63 times more than one with only a high school diploma. However, Malaysia’s labour market exhibits high education premiums, largely due to an oversupply of low-educated workers. Expanding education access, particularly for non-citizen children born in Malaysia, would help address this imbalance, improving labour market productivity and contributing to the nation’s transition into a high-income economy.

This study estimates the long-term economic loss resulting from the education deprivation of non-citizen children born in Malaysia. Using a cohort-based projection model, it traces the economic trajectory of a cohort of 290,437 children born in Malaysia without Malaysian citizenship in 2016. The analysis estimates that the forgone earnings resulting from their exclusion from education will amount to between 4.00 and 9.49 percent of Malaysia’s GDP in 2025, based on present value calculations.

It is important to note that this estimate captures only direct earnings losses due to educational disparities. However, the broader economic and social costs of education deprivation extend beyond wage differentials. Limited access to education affects job security, career advancement, and productivity, all of which contribute to long-term economic inefficiencies. Additionally, lower education levels are associated with higher social costs, including greater dependence on informal employment, increased vulnerability to economic shocks, and reduced social mobility.

These findings highlight the substantial economic cost of excluding non-citizen children born in Malaysia from formal education. The loss is not limited to individual earnings but extends to lower national productivity, reduced innovation, and increased social welfare burdens. Addressing this issue is not just a moral imperative but a strategic policy priority for Malaysia’s long-term economic resilience. Ensuring that all children, regardless of legal status, have access to education is critical to securing the country’s economic future in the face of an aging population and shifting labour market dynamics.

The full report can be downloaded at link below...

https://swrc.um.edu.my/Reports%20and%20Books/Policy%20Paper/Wasted%20Potential_Final%20Paper%20April%2024_2025.pdf

Source: https://swrc.um.edu.my/book-book-chapters-amp-reports