Focus on raising income rather than lowering costs

 

With a rise in the standard of living, the cost of living has also gone up for the average Malaysian family.

PETALING JAYA: An economist has proposed that the government introduce a masterplan to raise household income to lift the nation out of the middle-income trap.

Barjoyai Bardai of Universiti Tun Abdul Razak said this is more feasible given that the current rate of development has made it impossible to lower the cost of living.

“When there is rapid development, the standard of living improves through the provision of public amenities and that also brings changes in consumer behaviour,” he told FMT.

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“When the standard of living rises, so does the cost,” he said.

The standard and cost of living are two different but interconnected aspects, he explained.

Barjoyai pointed out that if the objective of lowering the cost of living is unachievable, the only way to enhance the quality of life is to raise income.

It is estimated that about 50% of wage earners take home under RM2,300 a month now. Wages have stagnated over the last decade.

“We have dug ourselves into a hole from which we can’t get out,” Barjoyai said. “That’s what has happened to the rakyat. Salaries have not risen for 10 years now.”

He said the nation should aim for an average household income of at least RM5,000 per month within five years. “Only then can we witness a change for the better,” he said.

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On Wednesday, Umno supreme council member Puad Zarkashi asked the government to outline the “practical solutions” that have been taken by economy minister Rafizi Ramli to improve the country’s economy.

Puad claimed that Rafizi has not offered anything more compelling than the Malaysian People’s Aid (BR1M) that was introduced by the Najib Razak administration.

Barjoyai urged critics to consider multiple perspectives when assessing the economic situation.

“Our economy has, in fact, rebounded from the downturn when viewed from the standpoint of development and the rate of growth,” he added.

The Malaysian economy grew 5.6% in the first quarter of 2023 (Q1 2023), beating most forecasts.

Analysts polled by Reuters last month had forecast a 4.8% annual growth.

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The Malaysian economy also expanded at a faster pace than those of other economies in the Asia-Pacific region. In the same quarter, Indonesia saw a 5% growth, China recorded a 4.5% expansion while Vietnam inched up 3.3%. - FMT