Salary increment cannot match rise in cost of living

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  • Friday, 31 Mar 2017

EVERYONE, including me, has been complaining about the ever increasing cost of living. However, the official inflation rate (CPI) has only ranged from 2% to 3.5% a year in the past 10 years.

It is really hard to believe. We all know that the official consumer price index (CPI) does not accurately reflect the actual cost of living increases.

This has caused problems for workers and unions because wage increases are usually based on the official CPI figures.

This point was highlighted to me by a friend who sent me a picture taken in 2009 showing that garlic was RM2.80 a kilogramme. She also sent me a recent picture showing the price at RM14.60.

That is a 421% increase in nine years. My salary did not go up by 421% in the past eight years.

Even bank employees, who are represented by a union, are generally awarded salary increment of about 10% every three years. Compounded, that is only a 33% increase in nine years. Other workers get much lower increases.

The other day, I was shocked that Indonesian langsat is RM9 per kg, up from RM10 for three kg just three years ago. When I protested to the roadside trader, he replied: “Indonesian rupiah naik, bang.”

That is really embarrassing. Our ringgit is getting worse even against the rupiah, let alone the US dollar, euro, Singapore dollar, Thai baht and almost every other major currency.

The powers-that-be will dismiss my perennial complaints as ramblings and my claims that our standard of living has fallen as utter nonsense. They will point to official statistics.

According to the “Malaysian Economy in Figures 2016” report by the Economic Planning Unit, Malaysia’s gross national income (GNI) per capita fell from US$10,677 in 2014 to an estimated US$8,821 last year.

Those who want to paint a glossy picture may point out that Malaysia’s GNI per capita in ringgit terms actually rose from RM34,945 in 2014 to an estimated RM37,930 last year. They may say that the drop of the GNI per capita in US dollar terms may be very alarming but the ringgit exchange rate had depreciated markedly by an average 27%. So falling by 17% in US dollar terms is not bad.

This does not mean we are doing okay. The real test would be to compare it with other countries. Why should the ringgit depreciate by 27% if “we are doing ok”.

High income is measured in US dollars. There is no point having an increase in ringgit terms when the cost of goods and services is very much impacted by the US dollar. Our purchasing power, especially in buying foreign goods, has dropped. Even domestic items are not spared. Just last week I had to pay RM2.50 for a butter bun because according to the bakery, the price of imported butter has increased.

Asian Development Bank lead economist (trade and regional cooperation) Jayant Menon said the estimated fall in GNI per capita in US dollar terms showed that living standards were being “significantly eroded”.

“It suggests that the capacity of the average consumer to purchase goods and services, produced abroad as well as at home, is diminishing.

“This drop also pushes Malaysia’s aspirations of graduating to developed or high-income country status even further away, since the benchmark is defined not in ringgit but in US dollars,” she was quoted as saying.

With wages falling behind such price increases, not only are our living standards falling but income inequality has widened.

In 2014, the Organisation for Economic Cooperation and Development (OECD) found that Britain’s economy would have been more than 20% bigger had the gap between rich and poor not widened since the 1980s.

OECD said the richest 10% of the population now earned 9.5 times the income of the poorest 10%, up from seven times in the 1980s. However, the result had been slower, not faster, growth.

It concluded that “income inequality has a sizeable and statistically negative impact on growth”.

Apart from Britain, rising inequality in the two decades after 1985 is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand, 9% in Finland and Norway, and between six and seven percentage points in the US, Italy and Sweden.

Our leaders need to be con­cerned about the bottom 40% and ensure that a holistic economic policy and implementation are in place to create decent jobs. Anti-poverty programmes such as BR1M will not be enough.

Wages continue to be depressed by the presence of millions of foreign workers. There is no way we can create decent jobs if we turn a blind eye to the issue. The recent arrest of immigration officers in Sarawak is just the tip of the iceberg.

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Opinion , East Malaysia , union yes , andrew lo


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