According to the 13th Malaysia Plan document, one main macroeconomic target is to grow per capita gross national income (GNI) to RM77,200 by 2030. It was RM54,793 in 2024.
At the same time, the plan also wants the “floor” to be raised. In other words, the bottom 40% and middle 40% segments of the population should also benefit from the growth in national income.
One key indicator that the government intends to use to monitor how equitably national income is being distributed is the percentage of gross domestic product (GDP) that employers pay to workers as wages and other benefits – also referred to as compensation of employees.
Currently, only about 33% of Malaysian GDP accrues to workers as total compensation from employers. The 13th Malaysia Plan aims to push this figure up to 40% of GDP by 2030.
The socialist party PSM is in broad agreement with these intentions.
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However, we would like to point out that there are several ways this 40% target in workers’ compensation can be attained.
In the extreme scenario, a marked increase in the salaries of the chief executive officers and senior managers in the 100,000 largest companies in Malaysia, can raise the employees’ compensation to 40% of GDP without any actual increment in the incomes of the bottom 40% and middle 40% segments of the population.
The total wages to GDP ratio isn’t a good enough indicator of the equitability of growth. We need more accurate indicators to track how fairly GDP growth is being distributed.
The Department of Statistics (DoS) should track workers’ compensation received by each decile of formal sector workers at six-monthly intervals. That should not be too difficult as 8.9 million workers are active Employees Provident Fund (EPF) contributors and another 1.6 million are government servants. Collecting wage data from the EPF and the government would enable the DoS to generate more precise indicators of GDP distribution to workers in the formal sector.
The situation of the about 1.5 million non-formal sector workers is more difficult to assess accurately. These contract workers, who constitute about 13.5% of the total number of wage-earning people in the economy, are distributed throughout the economy both in urban and rural areas – in restaurants, logistics companies, construction sites and on farms. The DoS would need to conduct surveys at these different work places to generate usable data.
However, the technical difficulties in obtaining data pertaining to non-formal sector workers should not be used as an excuse for not announcing wage-to-GDP percentages for each decile of formal sector workers. The figures for formal sector employees can serve as a proxy for the entire working class, and announcing them at six-monthly intervals will enable government planners and the people to keep an eye on the equitability of GDP growth under the 13th Malaysia Plan.
PSM hopes that government planners and DoS officials recognise the crucial importance of accurate real-time indicators to ensuring that 13th Malaysia Plan’s intent to promote equitable growth is attained. Close monitoring is the key to translate rhetoric into reality.
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