Are Malaysians paid fairly for the work they do? That is the question many Malaysians are asking after an article on World of Buzz highlighted the large wage disparity between Malaysia and Singapore. While there are many factors such as cost of living that might have been a factor here, there are other granular reasons that also play a role in enlarging the gap. We speak to Tan E-Hun from REFSA to understand the causes behind this wage disparity.
Summary
Are Malaysians paid fairly for the work they do? That is the question many Malaysians are asking after an article on World of Buzz highlighted the large wage disparity between Malaysia and Singapore. While there are many factors such as cost of living that might have been a factor here, there are other granular reasons that also play a role in enlarging the gap.
REFSA’s Executive Director Tan E Hun sat down with BFM to explore further. On the issue of income disparity in Malaysia, she mentioned that there are various factors that come into play when talking about wages. Most notably are productivity, living costs, taxation rates, scarcity and investment of capital.
Highlighting that income inequality in Malaysia has increased, for urban and rural areas alike and across all ethnicity, the GINI coefficient has also risen from 0.399 to 0.407 between 2016 to 2019. E hun acknowledged that the 12th Malaysia Plan discusses inequality, but it can focus further into equality between migrants vs local workers, women vs men, as well as urban vs rural.
E Hun stressed the positive impact of increasing wages at the lower end of the payscale as downward pressure on wages deters firms from crucial investment decisions and undermines potential for investment-driven growth, especially where productivity is concerned.
Other barriers for fair compensation of labour include asymmetric relationships between employer and employee, poor visibility on the earnings of peers, as well as the glorification of overwork in Malaysian cultural norms. All these have caused Malaysia’s wage progression to lag significantly behind the times and cost of living. E Hun also pointed out Malaysia’s ease of access to low cost foreign workers, which for certain sectors are putting pressure on keeping wages low.
To overcome this problem, she suggested policies to stimulate investment, capitalise on the ongoing digital transformation efforts, and encourage growth in high productivity activities, as increased productivity will allow companies room to pay workers more. Further, it is not just about encouraging automation, but also through teaching people how to do their job more effectively, develop better management styles. All these basically requires investment in time, or money. In this regard, government plays a huge role in facilitating improvement of all these factors.
Produced by: Jeremy Ng
Presented by: Freda Liu, Richard Bradbury