Younger, less-educated Malaysian workers face sluggish wage growth

09 Dec 2019 / 23:15 H.

KUALA LUMPUR: Wage growth for younger and less-educated workers has been sluggish, persistently trailing the earnings of older and better-educated workers, according to the World Bank’s Malaysia Economic Monitor “Making Ends Meet” launched today.

The report said income growth has slowed considerably for lower-income households. From 2014 to 2016, not only did overall household income growth slow to 5.5%, but lower-income households were no longer catching up even in relative terms, as income growth rates among the M40 were slightly higher than those of the B40.

“To the extent that accelerated income growth from 2009 to 2014 for the B40 and M40 shaped households’ expectations about future income growth, they may possibly view the slower and less inclusive growth from 2014 to 2016 as a disappointment, which could in turn affect perceptions about increases in the cost of living.”

The report also noted that even when income growth rates were higher among lower-income households, the absolute gaps across income groups continued to increase, which could contribute to perceptions of being “left behind”.

It is very common for lower-income households’ absolute income gains in currency terms to be less than that of higher-income households because of their lower base income, even when the lower-income households’ incomes are growing at a faster rate.

“These increases in absolute income gaps may contribute to perceptions of being ‘left behind’ even during periods such as 2009 to 2014, when lower-income households were gaining a larger share of total income because their incomes were increasing more rapidly than their richer counterparts. Naturally, this perception would likely be amplified, and fully justified, in periods such as 2014 to 2016, when the income gap between the B40 and the M40 increased in both absolute and relative terms,” the report found.

Meanwhile, younger workers in Malaysia experience slower income growth than their older counterparts, and the gap has widened in recent times. Incomes for all age groups have tended to grow faster than inflation, but the growth in employment earnings for younger workers has consistently lagged those of their older counterparts.

Slower employment income growth is most pronounced among young men. For example, in 2004 median employment income among men aged 20–29 was 70% that of their counterparts aged 40–49, and by 2016 that ratio had eroded to 58%.

Furthermore, between 2004 and 2016 the compound annual growth rates of median employment income for 20–29 year-old men and women were 2.1% and 2.6%, respectively, compared to 3.8% and 5.0% for those 40–49 years old.

The divergence in employment income by age groups accelerated after 2009 among both men and women. The relationship between age group and median employment income is somewhat weaker for women, which could reflect women above 30 years old who are more likely to work part-time to balance family and work commitments.

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