AUG 9 — In reference to the Malay Mail Online article "Feeling the pinch? It’s not just because of higher cost of living,” I believe the topic is a crucial one but it’s a topic that cries for greater attention and hence a deeper dive-through. 

The article rightly exposes and cites studies that show wages—despite growing 6.7per cent last year— are actually on a decline when considering inflation. With wages in urban areas growing only 3 per cent, Dr Muhammed Abdul Khalid, author of The Colours of Inequality runs through the calculations: "For Kuala Lumpur, for instance, the median wage last year is about RM2,200. If you look at this year, the median wage is also RM2,200, which means, if you minus inflation (increase of 2 per cent points to GDP in Q1, 2016), the increase is actually negative.” This is an issue accepted by all on both sides of the political sphere and the reporter is right to look at it as a systemic malfunction. 

The article endorses a measure to transform our economy into one that is "built on manufacturing high value-added products and selling or exporting them to receptive markets.” Accordingly, this will generate enough revenue from progressive tax to float government revenue. The report then pushes for the government to accept its failures, claiming that certain policies have failed us in getting to this stage. What the article fails to mention is the government’s effort to join the Trans Pacific Partnership (TPP), a free trade deal between 12 Pacific-rim countries. Not only will the TPP open Malaysia to receptive markets — as the report advises — it will also expose our companies to competition that challenges the wages deemed domestically normal. Our companies will have to compete to provide higher wages, pushed by the incentive to attract the most productive and efficient labor.

Earlier this year in January, I was invited to speak as a panelist in the forum focused on "Derita Orang Bandar” where the topic of the day was cost of living. Rather than looking, as the Malay Mail article put it, "on one side of the coin,” I opted for the listeners and fellow panelists (who were members of the opposition) to also focus on the stagnation in corporate spending on wages. In Malaysia, the compensation of employees, CE (labour cost) stood at 33.8 per cent in 1971. Shockingly, in 2014, the number has only increased to 34.3 per cent. Not much of a rise along the years. So to blame the government, as does Rafizi Ramli, and to only focus on cost of living is both unprogressive and a contributor to the vicious cycle that perpetuates the problem. We need to look at the issue in the bigger picture. 

As an added value, it is imperative that our government provides incentives for companies to increase their CE. Corporate tax incentives can be lowered for companies who achieve the threshold of 40 per cent CE or above. This is feasible. Blaming GST and demanding that the government accept it as a failure of its management of the economy is also a step that will lead us nowhere. We must not forget the inherent issues of the past SST system; where certain companies paid multiple taxes and higher levels of tax-on-tax (cascading tax) and where administration and government management was difficult.

Firdaos Rosli of the Institute of Strategic and International Studies (ISIS) in the article leans towards the same solution, advising that government intervention is needed to prompt spending by opening up the market, which can help drive prices of goods down if increasing salary is not a viable option. 

*This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.