Wage Gap Widening

Ever widening income disparity between rich Malaysians and the rest, says economist 

BY SHERIDAN MAHAVERA  The Malaysian Insider

Published: 11 August 2015 7:00 AM

The Khazanah Research Institute's Director of Research Dr Muhammed Abdul Khalid uses the benchmark of car sales showing declining sales in the lower price range cars against major increases in luxury car sales as further proof that the income gap is widening betwen the rich and the rest of Malaysia. – The Malaysian Insider pic, August 11, 2015.

The income gap between top earning Malaysian individuals and everyone else is widening, an economist with a local think tank said, even though income disparity between households has gone down.

Dr Muhammed Abdul Khalid said some indicators of this are how luxury car and home sales have gone up, and are still buoyant compared with sales of the middle and low-end range of these products.

The sales for luxury big ticket items are also happening at a time when overall consumer sentiment is weak due to inflation and a slow economy, said Muhammed, who is attached to the Khazanah Research Institute.

“Car sales in Malaysia are down but for Porsche it is up by 180%. Proton is down 22% and Naza down by 100%, but for Mercedes it is up 44%. 

“The high end cars are selling like hot cakes and the lower end is dropping. The rich are ok. The low (income) have a problem,” Muhammed said on the sidelines of the Malaysian Student Leaders Summit in Kuala Lumpur on Sunday.

The same he said, was happening with more high-end houses being developed and sold compared with medium- to low-end ranged houses.

Putrajaya aims to reduce income disparity between the bottom 40% and the top 20% of households as part of the 11th Malaysia Plan (11MP).

Experts have questioned whether the 11MP can reach these targets as the country must consistently grow the economy at a rate of 5% each year till 2020.

Economists have recently predicted that Malaysia's GDP growth for 2015 will be around 4% or slightly higher.

Concentrated wealth

At the forum, Muhammed said average growth of individual wages last year only registered between 2% and 3%.

In Selangor, overall individual income growth was negative as the rise in cost of living, outstripped the growth in wages.

A typical worker in Selangor saw his income grow by an average RM20 a month. But when petrol prices went up by 10 sen, this translated into roughly a RM32 increase in spending on petrol per month, he said.

“So essentially, the rise in income for the average Selangor worker was wiped out by the increase in expenses,” Muhammad told the student leaders forum.

Individual income is derived from the wages and assets for one worker. Household income refers to total income from salaries, assets and welfare aid such as the People’s Aid Scheme (BR1M) for one household.

According to the Statistics Department, a typical Malaysian household has 4.4 members.

While income disparity between households in Malaysia is declining, Muhammad said, there were still wide differences between households depending on region.

Incomes and living standards in Kuala Lumpur, for instance, were on par with South Korea, but still lower in poorer states such as Kelantan and Kedah.

“The people of Kelantan for instance have income levels that are nearer to people in Sri Lanka.” 

If these disparities continued, Malaysia’s aim to become a high income nation by 2020 would be meaningless as the added prosperity would only be felt by those in places such as Kuala Lumpur and Selangor. – August 11, 2015.

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