KUALA LUMPUR: Household income in Malaysia is projected to increase, especially with the introduction of the minimum wage and new salary schemes.
RHB Research Sdn Bhd (RHB Research) senior economist, Shafizal Shafaai said the minimum wage requirement for the private sector, effective January 1, 2013, would likely increase the household income.
He said the Civil Service Remuneration Scheme announced by Prime Minister Datuk Seri Najib Tun Razak in the Budget 2012 would also contribute to improving household income, with a higher annual increment of RM80 to RM320.
This is on top of the revised salary to 13 per cent from seven per cent.
“Similarly, the standardisation of the Armed Forces’ remuneration will also help partially offset the impact of higher inflation due to the subsidy rationalisation,” he told Bernama.
The latest Household Income Survey conducted by the Statistics Department has shown a 7.2 per cent increase in average household income in 2012 compared to the previous survey in 2009.
The Salary Survey 2013 by the Malaysia Employers Federation (MEF) also showed that salaries for executives increased 6.3 per cent, while that for non-executives rose 6.7 per cent.
Shafizal said while most employees in the private sector are getting sufficient increments of more than five per cent per annum, for some it is below three per cent.
“Certain employees do not get increments at all due to not meeting their key performance indicators.
Also, the yearly increment does not reach all employees.Some do not have increments due to the type of industries they work in, usually blue collar workers,” he added.
These people will likely be the most vulnerable to the higher inflation environment and have spending to cope with the higher cost of living.
He said employees with a lower income will face greater difficulty adapting to the rising cost of living, but this also depends on the expenditure pattern, residential area and how many are working in the household.
“It is a difficult balancing situation for the government too as it needs to look into reducing the fiscal deficit and improve the balance sheet,” he added.
For Secretary General and Chief of Secretary for the Bumiputera Manufacturers & Services Industry Association of Malaysia, Datuk Dr Mohd Noor Ali Akbar, the increment in salaries would definitely increase further household disposable income.
This would consequently bolster consumption spending, especially if supported by stable employment conditions in domestic-oriented sectors.
“An increase in the salary increment is highly desirable, followed by government action to control the price of essential consumer products, basic necessities, and utilities. In short anything that affects consumers’ disposable income.
“This is also related to the governments’ efforts to distribute income equally to levels,” he said.
However, Hong Leong Investment Bank economist, Sia Ket Ee cautioned that any salary increment must be justified by an improvement in productivity.
“Any significant increase in wages that does not commensurate with an improvement in productivity will fan a second round inflation, causing an upward spiral in general price levels,” he said.
Sia said assuming a sustained increase in workers’ productivity, a salary increment of 6.2 per cent to 6.7 per cent is broadly in line with the moderate rise in inflation throughout 2014. — Bernama