Cost of living: Purchasing power of wages should remain high, says expert

02 Jul 2023 08:00am
Expert says raising salaries, but making sure purchasing power of the wages remains high FILEPIX
Expert says raising salaries, but making sure purchasing power of the wages remains high FILEPIX

SHAH ALAM - Although a salary hike will solve cost of living issues, long-term solutions, such as making sure the purchasing power of wages remains high, are needed, says an expert.

University of Malaya Faculty of Business and Economics Professor Mohd Nazari Ismail said increasing salaries is needed to solve the rising cost of living problem among Malaysians.

"If you go to some developed countries, the salaries are higher compared to Malaysia, but the cost of living problem is worse.

"For example, in Singapore, the salary of teachers is higher compared to the wages of teachers in Malaysia.

"However, teachers in Malaysia, if they live outside big cities, can afford to live in bungalows, which teachers in Singapore can never afford.

"Teachers in Malaysia can afford to own cars, but it is a different issue in Singapore, and that is the reason our cost of living is lower compared to Singapore.

He added that the long-term solution is not raising salaries but making sure the purchasing power of wages remains high.

"That can only be achieved when the system is changed so that money cannot be easily created by commercial banks, which they do when they lend to borrowers.

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"Our society's members should stop going to banks to borrow money to spend, and they should adopt a different lifestyle and not resort to bank loans to consume.

"People should adopt a lifestyle of saving money first before spending, and when you resort to borrowing money to spend, you are living beyond your means.

"If people don’t realise this fact and refuse to change their lifestyle, then no government can solve the cost of living problem," he expressed.

Academy of Professors Malaysia Regional Development Cluster Council member and head Professor Dr K. Kuperan Viswanatham said the framework uses disposable income as a basis to determine vulnerability and exposure to increasing the cost of living.

"If the disposable income is low, any rise in the cost of living will be difficult to deal with for those facing the situation.

"Disposable income is the amount of money households have to spend after deducting necessities such as food, rent, utilities, education, and health costs.

"Salaries will have to be increased if the disposable income is zero or negative," he said.

He added that the government can increase public sector salaries by a certain percentage to offset inflation and increase disposable income.

"For example, the government can provide a five per cent increase in salary for public servants, and the private sector can then take the lead and also increase private sector salaries.

"Any salary increase will help all groups, M40 and B20," he said.

He added that the challenge for the government is to find the money to fund the salary increase, as it has to come from government revenue.

‘Government revenue comes mainly from tax revenue and earnings from government assets such as oil and gas, forestry, and land.

"It will also have to reallocate its budget to pay for the salary increase, and this would also lead to less money for development expenditures," he said.

Recently, Economy Minister Rafizi Ramli said a framework is being drawn up to ensure that Malaysians see an increase in salary commensurate with the rise in living costs.

He said that in order to deal with the cost of living, it was among the strategies being formulated.

His ministry, along with the Human Resources Ministry, is developing the framework so that salary growth in Malaysia becomes steadier and more inclusive.