Walk the tightrope with Malaysian graduates, navigating the imbalance between rising living costs and stagnant wages in Malaysia's economic landscape.
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31 Jan 2024
6 Min Read
Afrina Arfa (Alumni Columnist), Nellie Chan (Editor)
Walk the tightrope with Malaysian graduates, navigating the imbalance between rising living costs and stagnant wages in Malaysia's economic landscape.
There’s a fundamental rule in the world of finance that resonates louder than ever — don’t spend more than you earn. For Malaysian graduates navigating the complex maze of rising living costs amidst stagnant wages, the rule proves to be nearly impossible to follow. In 2022, Malaysia witnessed a surge in the number of fresh graduates at 5.92 million, up 5.1% from the previous year. Among them, 5.06 million joined the labour force, while 187,800 found themselves caught in the throes of joblessness. Over the past decade, unemployment figures amongst graduates have snowballed from tens of thousands to hundreds of thousands, rolling down a concerning trajectory.
Despite acquiring knowledge and skills through higher education, fresh graduates encounter jobs pegged at the country’s minimum wage of RM1,500. According to a 2023 article, 60% of vacancies offered salaries between RM1,500 and RM1,999, while only 15% offered salaries between RM2,000 and RM2,999 — a stark contrast to the average starting salary for graduates with an honours degree, standing at RM2,700. The apparent discrepancy between graduates’ expectations for starting salaries and employers’ offerings points to the structural wage problem in the country.
In contrast, a survey in Singapore found that the median gross monthly salary of their fresh graduates in 2022 had shot up to S$4,200, approximating RM14,800. With many companies in Malaysia offering salaries lower than RM2,000, it is justifiable that some of our graduates are contemplating job opportunities abroad. For those opting for opportunities at home, a crucial question arises: Will our salaries be sufficient for the cost of living?
The rising cost of living has once again stolen the spotlight, putting pressure on people’s wallets across the country. From everyday essentials to housing, education, healthcare, and more, these expenses have become a financial burden, weighing heavily on individuals and households alike. While inflation often shoulders the blame for the rise in living costs, Malaysia’s inflation rate denies this responsibility, recording a modest 1.5% in November 2023, down from 4% in November 2022. Despite this decrease, the positive figure indicates that the price level(s) is still increasing, albeit at a slower pace. Therefore, other factors are driving up the cost of living — ‘global factors’ and the depreciation of the Malaysian ringgit.
One significant global factor is the ongoing Russia-Ukraine war, disrupting agricultural crop production and reducing supply. As demand surpasses supply, prices rise, resulting in higher costs for imported goods and potential shortages. The depreciation of the Malaysian ringgit to an almost one-month low of 4.707 against the US dollar further contributes to consumers paying more.
The Belanjawanku 2022/2023, an expenditure guide for Malaysians launched by the Employees Provident Fund (EPF), has sparked intense debate due to its estimated minimum monthly expenses required for a reasonable standard of living. According to the guide, a single person living in Klang Valley who is a public transport user would require RM1,930, while a car owner would require RM2,600. The guide also estimates that these single persons would spend RM610, RM370, and RM250 on food, housing, and personal savings, respectively. In contrast, a 2013 survey conducted by Jobstreet.com revealed that fresh graduates, with an average basic salary of RM2,500, struggled to make ends meet. 77% of the graduates said that their salary does not leave them with any savings after spending on essentials, such as car and study loans.
In 2010, the median and mean monthly salaries for Malaysians were RM1,500 and RM1,936, respectively. Fast forward to 2020, and we see an increase in the median to RM2,062 and the mean to RM2,933. Despite the overall growth in salary figures over the decade, the increment is negligible when considered in the context of the extended period of time. The Economic Outlook 2024 report, citing data from the Khazanah Research Institute (KRI) and the Department of Statistics, Malaysia, acknowledged wage stagnation as a central feature of the Malaysian labour market, despite the effects of minimum wage. The report stated that the ‘squeezed middle’, comprising those whose wages were between the 45th and almost 80th percentile, experienced the slowest monthly wage growth.
The reality is similarly grim for recent graduates entering the workforce. Over 70% of working graduates earn below RM2,000 per month, and the percentage of those earning between RM1,000 and RM2,000 has increased from 43.7% in 2010 to 54.6% in 2020. Consequently, Malaysia faces the challenge of brain drain, with compensation listed as one of the top three drivers. According to a 2011 report by the World Bank, 54% of the brain drain is hosted in Singapore. The median monthly income there has risen 46% over the past ten years, from $3,480 in 2012 to $5,070 in 2022. This glaring disparity between the two countries, despite their proximity, highlights the widening gap between wages and living costs in Malaysia — one that has many Malaysians struggling to make ends meet.
While the government has made efforts to address the issue, such as increasing the minimum wage from RM1,200 to RM1,500 in July 2023, it is clear that in the ongoing race between rising living costs and stagnant wages, the former maintains a steady lead over the latter.
To address the pressing issue of rising living costs, the government has implemented a series of interventions and policies. The most significant concern was the scarcity of local white rice (beras putih tempatan, BPT), driven by consumers steering from imported white rice (beras putih import, BPI) due to a sudden price surge following India's decision to halt rice exports. The government responded proactively with various intervention measures, including negotiating with 157 commercial factories to allocate 20% of their rice production to the government for centralised management and distribution, along with the launch of Operation BPT.
Additionally, the government initiated a phased approach to targeted subsidies, discontinuing subsidies and price controls for chicken while continuing the subsidy mechanism for Grade A, B, and C eggs, aimed at reducing subsidy leakage to foreigners and high-income groups. The Payung Rahmah initiative, encompassing the Rahmah Package, Rahmah Baskets, Rahmah Sales, and Menu Rahmah programmes, is aimed at assisting those facing the challenges of coping with the rising cost of living.
Despite the government’s vigorous efforts, relying solely on short-term measures such as financial aid is not the answer to the ongoing problem of rising living costs, emphasising the need for a more sustainable solution. Therefore, all eyes are now on Budget 2024, with the expectation that it will introduce long-term measures to effectively address the issue.
As the graduating class of 2024 embarks on the precarious journey of walking a tightrope between rising living costs and stagnant wages, it becomes apparent that addressing the financial challenges faced by recent graduates and the broader public requires strategic and targeted interventions. Atop treading this fine line, these graduates are already grappling with the other challenge of securing jobs in today's intensely competitive market. Hence, they often find themselves compelled to settle for a less-than-ideal income, teetering on the edge of a hand-to-mouth existence.
Nevertheless, there is always room for optimism as we eagerly await the economic reform(s) proposed by Budget 2024, especially for us graduates. While we wait, let us train for flexibility with training and marketplace programmes provided by the government and maintain agility with new job opportunities that would emerge in our ever-evolving landscape. As we navigate the tightrope of economic uncertainties, we must remain resilient on our journey towards the other side of financial stability.
Afrina Arfa is a Bachelor of Finance and Economics (Honours) alumna of Taylor's University. She spends her time indulging in economic news, hoping to inspire others to think beyond the constraints of society.
