PETALING JAYA: Malaysian workers can expect an increase in their personal income in 2023, but whether or not it will match pre-pandemic levels or have enough positive impact is still debatable.
Many factors have an impact on real salary increases, chief of which is inflation, according to economists FMT Business spoke to.
Over and above that is the disparity in salary increases for employees depending on their skills level and position in the organisation.
Even employers agree that salaries in Malaysia are still relatively low, but more disconcerting is the fact that it is those in the higher salary brackets who will benefit most from any boost in remuneration.
A recent global survey by ECA International, a consultancy that manages compensation and benefits for international workers, found that salaries in Malaysia are likely to rise in the region of 2.2% in 2023, making it one of the top five in the Asia-Pacific.
Ahead of Malaysia is India at 4.6%, followed by Vietnam at 4% and China at 3.8%. Cambodia and Malaysia are tied at 2.2%.
Benedict Weerasena, a director at the independent research institute Bait al-Amanah, sees the increase as more of a gradual recovery of wages. “We have yet to reach the pre-pandemic levels,” he pointed out.
Circumstances have also forced employers to offer more money. Yeah Kim Leng of the Sunway University business school said labour shortage is key in explaining these wage increases.
“The urgency to fill vacancies has forced employers to offer higher salaries,” he said.
On the other hand Barjoyai Bardai, professor emeritus at Universiti Tun Abdul Razak, believes that any real increase in income would not have been possible if not for the hefty subsidies already pumped into the economy.
He estimated that real inflation in Malaysia was at least 11% and any increase would have been negated if not for the subsidies.
Even within the same organisation, salary increases are inequitable, giving C-level executives more than their subordinates.
Experts point out that while more highly paid employees get smaller raises in percentage terms, it is still higher in absolute terms than what lower level employees get.
This, according to Yeah, is a global issue, making it essential that the share of the income for the labour force is raised.
However, Barjoyai cited another reason for the disparity. “I believe companies prefer to hire low-skilled workers because the minimum wage is still much lower than elsewhere in the region even after a 25% increase from RM1,200 in 2020 to RM1,500 in 2023,” he said.
Even employers concede that salaries are still quite low in Malaysia.
Small and Medium Enterprises Association (Samenta) chairman William Ng said a mechanism is needed to tie wages with productivity going forward.
“This enables employers to pay more to productive workers yet retain the right to pay less to the less productive ones,” he told FMT Business.
The low proportion of salary to gross domestic product (GDP) is another issue. In most developed countries, the ratio of salary to GDP is 60% but in Malaysia it is only around 35%.
Worst of all, decisions on salary increases are largely biased in favour of those at the top. As Yeah pointed out, with the GDP expected to show a 6% increase this year and projected to grow another 4.5% in 2023, salaries should increase as well.
However, he pointed out, salary adjustments are made by those in the top hierarchy in the company and “their decisions typically provide higher salaries for themselves”.
“Decision-makers base this on their judgement of their own relative contribution. There is an inherent bias prevalent,” Yeah said.
However, conditions are improving. Companies are increasingly adopting sound business practices that include fairer treatment of employees.
The adoption of environmental, social and corporate governance (ESG) standards and the UN sustainable development goals (SDG) is now on a voluntary basis, Yeah pointed out.
But Barjoyai expressed hope that employers will be more generous anyway.
“Many assume employees are greedy but they all just want what’s fair,” he pointed out.