Experts: It’s good but don’t hurt economy

PUTRAJAYA: The salary increase for civil servants is a step in the right direction but due diligence has to be done to prevent economic issues in the country, say experts.

The funds for the raise should not come from borrowings, and could even be on a case-by-case basis rather than a blanket pay hike, the economists said.

It must also be accompanied by higher productivity on the part of civil servants.

Veteran economist Dr Geoffrey Williams said the more-than-13% salary increase would boost morale and enhance good behaviour among civil servants.

“Civil servants are not just bureaucrats in Putrajaya, they are also our teachers, nurses, hospital staff, police, firefighters and other frontliners on whom we rely to do a good job.

“Their salaries have been generally low for decades and have not kept up with private sector wages, with some even earning below minimum wage and living below the poverty line.

“Better salaries will attract and retain better staff, improve motivation and morale, which help ensure reforms are actively implemented.

“Above all, it could help cut corruption, leakages and wastage, which often happens when people who are paid low salaries look for illicit ways to make money,” he said.

However, he added that a balance had to be struck between the extra RM10bil needed for higher salaries and economic growth to prevent bankrupting the economy.

“The government will have to walk a tightrope to balance the costs of the salary increase against the expected extra economic growth in 2025.

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“The extra RM10bil is about 2.5% of government spending and will have to be funded from a source other than borrowings, for it to be sustainable,” he said.

Economist Dr Carmelo Ferlito agreed, noting that the government should be transparent on the funding for the salary increase.

“If additional expenditures are deficit-financed, this will create inflation, making the salary increase a monetary illusion,” he said.

He felt the increase in civil servant salaries should be done on a case-by-case basis to ensure fairness.

“Not all workers will equally increase their performance or productivity, which could cause some to become complacent.

“Salary increases should be the result of individual negotiations between employer and employee to better reflect an employer’s performance and current market conditions.

“Rewards should reflect not only increased productivity but also market signals, instead of political decisions,” said Dr Ferlito, the chief executive officer for Center for Market Education (CME).

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Sunway University economics professor Dr Yeah Kim Leng said the salary raise would be a boon for civil servants, especially those in the lower wage categories.

“It will help them to better cope with the rise in cost of living and make a public service career more attractive,” he said.

“The increased salary allocation is about half a percentage point of gross domestic product.”

However, Dr Yeah also cautioned that it was important to ensure wage increases are accompanied by an increase in productivity and service quality.

He noted that given the country’s depressed wages, the raise will support income-led growth, as long as wage-induced inflationary pressures remain low and manageable.