T20 status fuels debate

THE issue of fuel subsidy roils on with the government steadfast in finding a solution to the multi-billion ringgit bill each month to keep prices at the pump stable.

Before the Mideast war, the the subsidy bill estimated at a manageable RM700,000 but has since shot up tenfold to RM7bil a month.

The government reacted by trying to trim expenses but that would only amount to RM10bil, which is good for about two months worth of subsidy.

The preamble is that non-critical cuts were being made.

But if the spending had been on non-critical services or goods, wasn’t it a unnecessary expense all along?

Cutting expenses for healthcare is debatable – is there any healthcare service that is non-critical?

Now, the realisation is that efforts have to be amplified.

The government is bracing the population to the fact that the effects of the Mideast war will linger and there has been talk about a cut in subsidised fuel caps by lowering the volume from 200 litres a month to 150 litres a month.

It has already been cut from 300 litres a month to 200 litres.

There have also been suggestions that fuel subsidies given to the top 20% or T20 group be scrapped.

However, that has been brushed aside, with the government saying there will be no removal of subsidies to the T20 group. First off, much of the T20 are concentrated in urban and semi-urban areas, where more than 80% of the population stays and living costs are higher than the rural areas.

Secondly, the T20 is a vote bank for the government and it will be foolish to infuriate that group just ahead of a general election.

By cutting subsidies, there will be a knock-on effect on prices and private consumption, which will filter down to the bottom 40% and middle 40% groups.

Much of the newsflow has been just how easy it is to cross into the T20 group, which is based on household income.

The thing is: A household in the T20 group is not necessarily one that is taking ski holidays at the French Alps or going on a safari holiday on a regular basis.

That is generally the realm of the T1. Even then, I would be generalising.

Many in the T20 have the same pressures as other income groups.

It is because the more you earn, the more you will spend.

Savings will of course be important but that will be balanced against the commitments that such people have.

The whole issue regarding the T20 and eligibility of subsidies is based on income levels. It is not how much they earn but how little is needed to make it to the T20 threshold.

Which brings us to the crux of the issue.

Malaysia has a problem with income levels in an economy that has for the longest time worked on having a cost competitive economy predicated on employing an army of cheap unskilled or semi-skilled foreign labour.

By ensuring an aspect of our competitiveness is based on cost, and by setting a minimum wage that is below living wage, its creates little incentive for companies to start paying more, even for university graduates.

Proof of that is evident from economic statistics.

Wage share to gross domestic product (GDP) in Malaysia was 33.6% in 2024, which is well below the 40% target set under the 12th Malaysia Plan and trailing far behind that of developed countries where that percentage is often more than 50%.

Malaysia has seen its percentage of wage share hover below the 35% mark for a long time, and the World Bank says our wages have grown about 43% since 2010 which was about half of the GDP growth during that same period.

It is also said Malaysia does not generate enough high-paying jobs and the proliferation of data centre investments is not going to help in that regard.

As wages do not keep pace with GDP, that is why there is an affordability issue in Malaysia.

If Malaysians are better paid or even approach the wage share to GDP of Singapore at 42%, Malaysians will be able to afford more things and certainly non-subsidised price of fuel.

Companies have been told to pay more than the minimum wage when hiring graduates but that’s a steep hill to climb.