Malaysia's 'zero wage increase' puzzles economists

World Bank economist Nadia Jalil said that logically, since employers complain of a shortage in supply of workers, salaries should be increasing in tandem with this high demand.

"In economics if you say something is in high demand, then this thing would grow but that really hasn't happened in Malaysia,” said Nadia at a forum organised by The Malaysian Insider discussing whether young Malaysians are struggling financially.

Offering an explanation of the low growth rate of wages, Nadia said that it could be due to the tendency of Malaysian companies to pay a lower percentage of operating margins compared to peers in the region.

She added that it could be also due to a skills gap of graduates. “So we are churning out graduates which are really not meeting what employers want. So employers are paying them a basic amount because they think we have to re-train those people they hire,” she said.

This ‘zero growth of wages’, said Nadia, was not sustainable in the long run as inflation continues to grow at 1-2% every year. Though she said that there is a lack of detailed wage information.

On the outlook in the next five years, Nadia said that Malaysians can “hope and pray” that the government’s structural reforms that are supposed to increase efficiency and competitiveness, will be implemented.

“Because when companies are more competitive, then chances are they will pay you more,” she said.

According to surveys done by professional services company Towers Watson, Malaysia recorded a salary increase of 5.5% in 2012.

This was compared with other countries in the region. Vietnam scored the highest (12.0%), followed by India (11.5%), others were Indonesia (9.1%), China (8.4%), Philippines (7.0%), Thailand (6.0%), South Korea (5.4%), Hong Kong (4.7%), Singapore (4.0%), Australia and Taiwan (4.0%), while Japan (2.3%) was the lowest.

Studies by the Education Ministry show that some 30% and 40% of fresh remain jobless after finishing university or are in mismatched industries.

This is despite a general unemployment rate of around 3.3%.

Among the reasons cited for such unemployment was the lack of language proficiency particularly in English as well as not having sufficient knowledge and competency in the jobs that they applied for.

In last year’s Federal Budget, Prime Minister Datuk Seri Najib Razak mooted setting up a Graduate Employability Taskforce with an allocation of RM200mil to strengthen the employ-ability of graduates.