Huge growth in GDP – so why the tough times for many?

The other day, I received a message from a relative abroad. “Malaysia economy grew by 6 per cent ... that’s huge,” he said.

Nov 25, 2017

By Anil Netto
The other day, I received a message from a relative abroad. “Malaysia economy grew by 6 per cent ... that’s huge,” he said. He was referring to the Malaysian GDP growth of 6.2 per cent in the third quarter of 2017 compared to 4.3 per cent in the same quarter last year.

I suggested to my relative that perhaps the growth was not being felt by many people on the ground. Perhaps the GDP  growth was only trickling down (trickle- down economics). 

There could be several reasons for this including high household debt, stagnant wages (after adjusting for inflation), the weak ringgit and the GST.

The economy may be growing but many of the factories employ migrant workers, who remit much of their (low) income abroad. This is happening at a time when local youth unemployment is hovering around 10 per cent.

According to Bank Negara data (The Edge, 6 November 2017), Malaysian workers’ wages grew less than 1 per cent last year. Even though the minimum wage was raised to RM1,000, labour’s share of the economy is just 35 per cent.

While government statistics (the Gini coefficient) show the income inequality has dropped over the years, the disparity in  EPF savings between the rich and the poor has been rising.

The top 0.4 per cent of EPF account holders hold more savings than the bottom 51.9 per cent, according to a 2014 World Bank study cited by The Edge. Two thirds  of EPF account holders below 55 have sav- ings below RM50,000 — so you can imag- ine how long their retirement savings will  last. An even bigger disparity in savings  is reflected among Amanah Saham Bumi- putera account holders.

The weak ringgit, especially, translates to more expensive vegetables and fruit and other imported items. This is the problem when the nation lacks food security and we have to rely a lot on imported food.

In addition, the Goods and Services Tax returns 6 per cent of consumption spending back to the government. The BR1M given  to households earning less than RM4,000 is probably not enough to make up for the GST and the rising cost of living.

Household budgets are further squeezed when budgetary cuts and the removal of  subsidies (in line with the neoliberal ide- ology) increase the cost of healthcare and  education.

(The government reportedly spends less than 5 per cent of GDP on social services.)

Meanwhile, the majority of houses built cost more than RM250,000 — which would be unaffordable to many.

Expensive housing loans, car loans, and the higher cost of living — along with relatively stagnant wages — contribute to household debt.

One stark figure shown in The Edge report is that 20.7 per cent of Malaysian children were stunted (low height for their  age) in 2016 – up from 17 per cent in 2006.

While household income may have grown by 4.3 per cent (in real terms) from 2014 to 2016, researcher Lee Hwok Aun says we need to really look at what are the components of the household figures to see if they reflect reality. The share of wages and salaries has dropped from 66.6  per cent in 2014 to 63.0 per cent of house- hold income in 2016 (Malaysiakini 6 No- vember). Self employment income too has  dropped.

On the other hand, household income from property and investment income and income from “transfers” have both risen.  But are these components of household in- come benefiting low-income households? 

So, to sum up, neoliberal economic poli- cies (such as the removal of subsidies and  budget cuts on social spending), the rising  cost of living and property prices and rela- tively stagnant wages have all taken a toll  on the people.

What this means is that economic growth  or GDP figures — and even the Gini coef- ficient, which measures income inequality  — may not be a reflection of what many people are feeling on the ground. And it certainly does not include the social and environmental costs of pursuing such growth.

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