NUR NADIAH makes RM2,400 gross a month – about the median Malaysian salary – and like the average Malaysian, she struggles to make ends meet.
The 27-year-old mother still faces financial difficulties although she has been working as an accountant at a small audit firm for four years.
Every month, Nur Nadiah spends the bulk of her income on transportation, food, her phone bill and her baby. She will then give RM300 to her parents.
“After paying all my expenses, I would only be left with RM200 for savings, emergencies, medical expenses, road tax, insurance and others, ” she says.
Fortunately for Nur Nadiah, hers is a dual income family and her husband pays for rent, groceries and utilities.
“I’m a degree holder but my starting salary was only RM1,800. It is tough, but I am more worried about our youngsters who are facing unemployment nowadays, ” she says.
Nur Nadiah’s predicament is not uncommon.
Earlier this month, the Statistics Department (DOSM) released the Salaries & Wages Survey Report Malaysia 2018 which found the median, or midpoint salary for employees to be RM2,308 with the mean (average) at RM3,087.
Salaries in urban areas were found to be higher at RM2,415 (median) and RM3,274 (mean) compared to those in rural areas where salaries are at RM1,481 (median) and RM2,083 (mean).
The annual Salaries & Wages Survey is conducted nationwide to collect information on monthly salaries and wages from the principal occupations of paid employees, who are defined as someone who works for at least six hours a day or at least 20 days a month.
The total number of paid employees in 2018 was 8.8 million persons.
The DOSM’s Report of Household Income And Basic Amenities Survey 2016, its most recent, found that five out of ten households received RM5,228 per month or less from various sources of income.
Salesman Adam*, 36, has a salary considered average for Malaysians – RM3,000 a month. However, he is in a quandary on how to stretch that amount in order to support his immediate family, both his parents and mother-in-law.
“I’ve not been giving my parents allowance for a few months and I feel really bad about this,” says Adam who lives in Shah Alam with his wife and three other family members.
“Sometimes I feel demotivated, but I also have to look at the bright side. I’m thankful that my wife is still working,” he says.
To shave off expenses, Adam has cut down on social activities and sports outings.
“I can’t think of any savings for later,” he says when questioned about how much he puts aside for the future.
“I just want to survive now.”
How much do we need?
To compare salaries and expenditure, we can look to the 2018 Bank Negara Malaysia (BNM) policy report, The Living Wage: Beyond Making Ends Meet. According to the BNM report, a single adult in Kuala Lumpur needs an estimated RM2,700 a month to make a living wage, a couple without children needs at least RM4,500 while a couple with two children need RM6,500.
A living wage is defined as an income level needed in order to afford a minimum acceptable living standard which includes the ability to participate in society, the opportunity for personal and family development, and freedom from severe financial stress.
Meanwhile, a minimum wage is an amount set by the authorities with the aim of protecting workers against unduly low pay.
The Employees Provident Fund’s (EPF) Belanjawanku Expenditure Guide 2019, which details the estimated minimum monthly expenses in the Klang Valley, is another source that can be used to measure monthly financial needs.
In the EPF’s budgeting guide, a single person who uses public transport in the Klang Valley is estimated to spend at least RM1,870 a month, a single car owner RM2,490 a month, a married couple without children RM4,420 a month and a married couple with one child RM5,730 a month.
While the Belanjawanku guide looks at food, housing, transport, utilities and other everyday costs, some significant payments such as insurance, telephone bills, parents’ allowance and student loan repayments are not listed as part of the expenditure guide which means that monthly costs could likely be higher.
The guide’s allocation for rental is also seen as being unrealistic at RM300 for a single person living in the city. In contrast, financial comparison website iMoney in its April 2019 survey found that the median amount being paid for renting a room in the Klang Valley was RM680.
One of the biggest challenges for Malaysians is housing and rental prices, which many believe to be inflated.
This is supported by evidence. According to BNM, houses in Malaysia are considered “seriously unaffordable” by international standards.
BNM revealed on Oct 24 that most Malaysians cannot afford to buy newly launched houses, as the average price of new properties is nearly 48% higher than the nationwide maximum affordable house price of RM282,000.
Putting wages into perspective
According to the DOSM report, the median and mean monthly salaries and wages of paid employees increased 6.6% and 7.0% respectively this year. Despite this, many Malaysians say that they do not feel that their purchasing power has increased as daily expenditures have also gone up.
“The median numbers in the report are significantly lower than the mean, which implies that the salaries and wages are right-skewed – that is, the right “tail” of the wage distribution is longer. In other words, there are some individuals who are doing very well and earning high salaries in Malaysia, ” says Asia School of Business (ASB) assistant professor of Economics Dr Melati Nungsari.
Melati, who is also a Research Affiliate at the Massachusetts Institute of Technology (MIT) Sloan School of Management explains that in cases like this, the number we should be looking at is the median salaries since it represents the “central” point of the salary distribution.
“If you were to consider the EPF’s Belanjawanku Guide, you see that an unmarried individual living in Klang Valley who owns a car needs roughly RM 2,490 a month to cover her expenses in 2019, ” she says.
“According to the DOSM report, a median urban individual in 2018 makes about RM2,415. This means that many individuals living in the city do not actually make enough to cover their living expenses according to the standards given in the EPF guide, ” she says.
“Thus, stating that the median salary increased by 6.6% isn’t really saying much without understanding the rise in the cost of living as well.”
However, Melati believes that the recent policies on social protection – which include fuel subsidies, accessible and affordable childcare services, tax reliefs for medical expenses, and incentives for employees and employers to hire fresh graduates – could potentially make a big difference in the lives of many if executed and implemented well, particularly the initiatives aimed at curbing youth unemployment.
The Malaysian Trades Union Congress (MTUC) agrees that the number to look at is the median, and adds that the median of RM2,308 is “rather low” when compared to the benchmark proposed by BNM in its 2017 living wage report.
“In general, the median is more robust with respect to outliers within the data set. In other words, a few people making a much higher salary than is normal can skew the results to make it look like it’s normal to make more. Hence, if outliers (extreme values) are expected, the median is the better choice, as a measure of central tendency,” it states.
By analysing the mean and median salaries of Malaysians, we will be able to get a clearer picture of national poverty, and will be better equipped at addressing financial needs of the poor.
Malaysia has set the poverty line at RM980 per household per month for West Malaysia, whereas it is RM1,020 for Sarawak and RM1,180 for Sabah. According to UN Special Rapporteur on Extreme Poverty and Human Rights Prof Philip Alston, Malaysia’s poverty line is “unduly low.”
“Applying the relative poverty concept used in some European countries (i.e. 60% of median income of RM2,308), the cut off point for poverty is RM1,384, ” says economist Prof Mohd Nazari Ismail from University Malaya’s Department of Business Strategy and Policy.
The current minimum wage stands at RM1,200 per month.
“If we are talking about household income, the median total amount according to the DOSM is RM5,228 which puts the cutoff level at RM3,136. My calculation shows that more than 20% of Malaysian households earn below that amount. That means more than 20% of Malaysians are poor, ” he says.
Malaysia’s official poverty rate dropped from 49% in 1970 to just 0.4% in 2016. Mohd Nazari’s calculation is closer to the poverty percentages proposed by Alston who, based on a range of independent analyses, puts Malaysia’s poverty rate around 16-20%.
Mohd Nazari believes that a major problem faced in Malaysia is its debt-based economic system.
“We need to change the system where corporations should rely on equity rather than debt to obtain financial resources and people should live within their means in order to reduce their borrowings and debts. This is the long term solution to our problem, ” he says.