Aidila Razak
Malaysiakini
Mar 23, 2013

COMMENT

Whether 41 percent or 49 percent, the numbers in the Economic Transformation Programme 2012 annual report is essentially trying to tell us this – Malaysia will reach high income status by 2020.

That gives the impression that the average Malaysian will be bringing home about RM48,000 (or US$15,000) a year by that time.

But will they? Does the average Malaysian feel 41 percent – or even the more modest 24 percent in ringgit terms – richer today compared to 2009? Are their pockets deeper?

The simple answer is no.

So is the government lying to us? Not exactly.

Let’s start with the incomes of our average households. As official data is collated and reported in ringgit terms by the Department of Statistics, the following arguments will use the ringgit.

The last survey on household income was conducted by the department in 2009. In 2009, it reported that average household income was RM4,025 per month or RM48,300 a year.

Taking into account a household size of 4.3 persons, each person in a household would bring home an average RM11,232 in 2009. Compare that to the gross national income (GNI) per capita for the same year – double the household income at RM24,879.

If Malaysians really did bring home the almost RM25,000 in income per capita, it works out to more than RM1,000 a month extra per person, enough to feed a small family. So where did that extra RM1,000 go?

Richer corporations, not richer workers

Why is GNI per capita not reflective of household income? The discrepancy can be explained in the way GNI and household income is measured.

GNI measures income from all recorded economic activity in a country plus whatever income that comes in from Malaysian entities operating abroad after subtracting income repatriated out by foreign companies operating here. Household income is measured through how much the household earns in wages, salaries, dividends, etc.

In other words, corporations and businesses may have done better and as a result the entire economy’s income is higher. But they may not necessarily be paying their workers any better, so workers may not be much richer.

Official data shows that nominal salaries grew at a slower rate compared to nominal GNI.

In the private sector, Bank Negara Malaysia observes, annual growth rate of nominal salaries in 2009 to 2012 was between 4 to 5 percent. In contrast, compounded annual growth rate for GNI over the same period, however, is 7.39 percent.

Wage data worldwide can be obtained on the International Labour Organisation’s website, but it only publishes data up to 2011.

According to the ILO, which gets its Malaysian data from the Department of Statistics, growth in nominal wages from 2009 to 2011 was 13.42 percent, lower than the 19 percent GNI per capita growth for the same period

And then there is inflation. For simplicity sake, let’s take on the ETP’s expectation that things will be about three percent more expensive every year from 2010 to 2020.

But inflation figures are measured by a selected number of goods, and is widely acknowledged to under-record the actual experience of consumers.

You may have to stretch your ringgit in other places, but if you can manage it, you’d much rather feed your baby better quality milk formula than a generic brand likely monitored for the consumer price index. Your household expenses may then grow higher than the inflation rate for the year.

Don’t forget income inequality

Taking all this into account, how much is left of your salary hike then?

You and I are not richer by either 41 percent or 49 percent. Our incomes didn’t even grow by 24 percent after the appreciation of the ringgit against the US dollar is taken out of the equation.

But it does not mean that the numbers are not kosher. What’s less than kosher, however, is using these numbers to make it seem like the household purse is getting fatter.

You and I don’t need numbers to realise that our pockets have not grown that much deeper in the last three years.

What we need, however, is a government which honestly spells out that reaching high income status would not automatically mean high income for the average Malaysian.

What we need is a government which does something to bring high income to you and me.

AIDILA RAZAK is a member of the Malaysiakini team.