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By Muhammad ‘Aamil Azhar, Research Analyst, Institut Masa Depan Malaysia
Recently, increasingly conscious Malaysians were shocked with new data showing a significant downward trend in the wage of new graduates in 2020, compared to the previous year. The data, released by the Department of Statistics Malaysia, showed a RM1000 drop in graduates starting wages from the year from the period year 2019 to 2020.
Whilst it’s true the sharp fall last year could be attributed to the sluggish performance of the partially shuttered economy, the reality is much more grim. When adjusted for inflation, starting salaries for tertiary graduates have been declining since 2010. Youths also struggle with stagnating wages. A recent study found those aged 20-29 had a median monthly income which has remained flat but those aged between 40-60 years old enjoyed increased pay between RM 5,000 to RM 6,000.
Therefore, young Malaysians are suffering from a twofold blow: a decline in starting salaries, coupled with a stagnant wage growth since the mid-21st century. Low starting salary levels have the effect of lowering subsequent salary offers thus making it harder for vulnerable youths (and graduates) to achieve financial independence and social migration.
We should aspire to the ideas of the Shared Prosperity Vision 2030 (SPV2030), where increasing compensation of employees stands as one of its strategic thrusts. The restructuring of graduate’s salary based on qualification needs to be implemented to attract and nurture talented locals into the workforce, thus enjoying a decent standard of living. Unattractive wages and salaries in skilled jobs in Malaysia as well as lucrative offers abroad has resulted in the brain drain of skilled talents, which in turn has affected the domestic labour market efficiency.
Our national vision, SPV2030, highlighted the plight that the compensation of employees to GDP is still low. The share of compensation of employees (CE) to GDP, which is the income earned by the employees, is 35.7% in 2018. Malaysia’s CE to GDP remains low compared to developed countries such as Germany at 51.5%, the United Kingdom at 49.4%, Australia at 47.2%, South Korea at 45.7% and Singapore at 39.7% in 2018.
Such low and inequitable payouts are unfair to the drivers of our economy. This is supported by the Bank Negara Malaysia Annual Report 2017, where employee salaries in Malaysia are not commensurate with labour productivity being on average at USD340. This is much lower compared to countries such as the United States, Australia, Germany, Singapore and the United Kingdom where the average salary was USD510 for every USD1,000 of output.
Fresh graduates, with very little experience, are most at risk of being nickel and dimed by their employers. The race to the bottom among employers have forced youths to compete with foreign workers who are paid an even more pitiful salary, further suppressing their wages.
Youths, through no fault of their own, will be told to accept their measly starting wages. Just as violence begets violence, so too does low pay. The future of our country will be left with no other options and are forced to take up a job that places them at a perpetual disadvantage at negotiating better compensation.
Prime Minister, Tan Sri Muhyiddin Yassin, recently announced that the minimum wage will be reviewed to ensure the earnings of workers remain relevant with current economic conditions. This news signals a crucial first step in ensuring graduates attain an earning that is commensurate with their knowledge. The current minimum wage of RM1,200 is barely sufficient in 2021 – responded Professor Datuk Dr John Antony Xavier.
In a webinar hosted by Institut MASA, Dr Antony further stressed that both the government and employers should aspire to pay their workers at the “living wage”. The living wage in Malaysia, a ringgit amount that would achieve a satisfactory standard of living, is estimated by our central bank to be at RM2,700.
Another panelist on the webinar, Premanand Ayavoo of UNIMAS’ student representative council, enthusiastically storied the plight of future graduates. Students currently face 2 big worries even before they enter the job market – job search anxiety and starting wage anxiety. They are worried whether they’ll receive any work at all and are also worried whether they’ll be properly compensated for their work. The COVID-19 pandemic has exacerbated the youth unemployment rate, with graduates having to take up exploitative gig-jobs and students struggling to secure even an internship placement.
If graduates want to be fairly compensated for their work, they should look for a career that fits perfectly with their skills, passions and experience – said Johary Mustapha, the Founder and CEO of Forest Interactive at the same event.
My opinion is that the government, through its far reaching arm of Government Linked Corporations (GLCs), should step up to the plate and create even more jobs for young Malaysians. These industry giants certainly have the capital to venture into sunrise industries which have a higher need for higher educated youths. The global drive towards renewable energy, autonomous driving, and a higher standard of data connectivity stands firmly to be sectors that would catapult Malaysia to a higher plane.
Everyone should set one’s heart on achieving the ideals of the Shared Prosperity Vision 2030. We have slipped too far deep into the low-wage mundanity and must dig ourselves out for the future of our youths.