Negative wage growth

KUALA LUMPUR (July 20, 2011): Wage increases in the country have been lagging behind rising prices of goods and services over the past few years, and this is fuelling a widening income disparity between the rich and poor, economists said.

And this high level of inequality is detrimental to future growth and if left unchecked, is a threat to the country's aspiration to become a high-income nation.

"We have a negative income growth in a growing economy," Institute of Strategic and International Studies (ISIS) senior analyst Muhammed Abdul Khalid said Wednesday in his presentation at a forum organised by Malaysia Rating Corp Bhd.

At the function, a book by MARC chief economist Nor Zahidi Alias, compiling his articles in the media, was also launched.

One reason often cited for this mismatch in salary increase and price hike is the oversupply of cheap labour in the country.

Muhammed said about 34% of the population earn less than RM700 a month. This means a third of the working population have an income below the official poverty line of RM720 a month.

According to Muhammed, the country's gross domestic product (GDP) expanded at an average rate of 5.3% every year between 2000 and 2009. In the meantime, wages increased by 2.9%, which was slower than the annual inflation rate of 3.2%.

The government hoped to achieve a steady 6% annual growth and become a developed nation by 2020. A key target is to boost gross national income per capita (GNI) to US$15,000 from the current US$8,140 and qualify as a high-income nation.

This brings the question of whether the wealth is equally distributed.

Muhammed said a lot of the country's wealth is concentrated in a small group of people, with 20% of the population owning 95% of the financial assets.

"The gap between the rural poor and urban rich is at its widest,'' he said.

Muhammed also shared his view on the brain drain, which he said is a "normal thing" that is happening all over the world.

The concern for Malaysia, however, was that the outflow of talents was not being compensated by inflows, resulting in a shortage in certain professions.