AS the government seeks to narrow the wage disparity among Malaysians through its Shared Prosperity Vision 2030, many of those stuck in the low-income bracket complain that their present salary is hardly enough to cover basic expenses and necessities.

People in the bottom 40% of households (B40) group said comfortable living is a distant dream due to their low wages and monthly commitments.

Meanwhile, experts said to bridge the income gap, the government should focus on reforming key areas, such as enhancing education and skill levels, and expanding entrepreneurial and income-generating opportunities for B40.

Melinda (not her real name), who works at an audit firm with a monthly salary of RM2,500, said she cannot afford to buy a car or house.

“I still have to depend on my parents’ help. I cannot travel, and inflation is also high. I can barely save,” she told The Malaysian Insight.

“My colleagues, too, have financial commitments, such as study and car loans, bills to pay and families to support.

“Some got married early and now have young children. It is difficult to cover all these.”

She said her salary went up to RM2,500 after four years of working, and the benefits, in terms of medical and annual leave, are not much.

“We get a RM6 meal allowance daily,” she said, adding that she could work up to 12 hours’ overtime.

A sales rep, who declined to be named, said her basic salary of RM1,100 is not enough to cover utility, phone and other bills.

“Sometimes, I have to repair my car,” she said, adding that her income is not fixed, given the nature of her job.

“The basic is low because the commission is high. There is a risk being in this field. If you have sales, you have a lot of money, but if you don’t, you have much less.”

For deliveryman Iskandar, however, a monthly salary of RM1,100 is sufficient to cover his expenses and provide for his parents, as he is unmarried and has no major monthly commitments.

According to Statistics Department data, the median income for a B40 household as of 2016 was RM3,000, and RM13,148 for the top 20% of households (T20) group.

Khazanah Research Institute, in The State of Households 2018: Different Realities report released last year, said the Gini coefficient, which is the most common statistical measure for income inequality, has declined since the 1970s.

Malaysia’s Gini dropped from 0.513 in 1970 to 0.399 in 2016, indicating a reduction in official income inequality. A Gini of zero means that all households have the same income.

However, the income gap between T20 and B40 has almost doubled when measured in absolute terms.

“For example, even when measured income inequality has improved, the absolute gaps in household income between the different income classes have continued to increase – in the past two decades, the actual differences in household income, adjusted to inflation, have almost doubled between T20, and the middle and bottom 40% of households, respectively,” said the report.

Wage growth not in tandem with productivity

Economist Professor Dr Yeah Kim Leng said income not growing in tandem with productivity is one of the reasons for wage disparity.

“One of the key reasons is low wages and slower wage increases than productivity growth, while returns to capital owners, who are typically in the T20 category, have risen, thereby widening the income gap,” the Sunway Business School lecturer told The Malaysian Insight.

“The low wages and income inequality are reflected in Malaysia’s substantially smaller labour share of income at 35.7%, compared with an average of 51% for advanced countries.”

He said technology, too, plays an important role in widening income inequality, as those who have the ability and capital to harness technology in business and investment are usually from T20.

To bridge the gap, he said, the government should focus on three key areas: enhancing education and skill levels, boosting quantity and quality investments in all sectors, and expanding entrepreneurial and income-generating opportunities for B40.

“The first area is lifting the education and skill levels, and at the same time, introducing a productivity- and innovation-driven mindset, for the B40 group.

“The second area is boosting the quantity and quality of investments across all sectors, so that the demand for labour, particularly the skilled category, rises along with faster wage increases that benefit the B40 group, rather than unskilled foreign workers.”

Yeah said entrepreneurial and income-generating opportunities can be expanded for B40 through training and the transfer of successful business models and ventures, including the provision of matching grants and funding for innovation, as well as research and development.

Speaking about the Shared Prosperity Vision 2030 on September 14, Prime Minister Dr Mahathir Mohamad said it aims to bridge the wage gap. – September 30, 2019.