This article first appeared in The Edge Financial Daily on December 10, 2019 - December 16, 2019

KUALA LUMPUR: Wage growth among the young, low-income earners and those less educated has been sluggish, and persistently trailing the earnings of older and better-educated workers, the World Bank said.

This has led to the perception that these groups of earners have been “left behind”, given that the income gap between them and those older and better-educated ones has consistently increased over time, the bank said in its latest Malaysia Economic Monitor report, themed Making Ends Meet.

While the report noted that Malaysian workers’ median incomes continue to outpace inflation between 2014 and 2016, data shows that income growth rates for low-income Malaysians slowed.

Median employment income for younger workers aged between 20 and 29 grew at an average annual rate of 2.4% during this period, compared with 3.9% for those aged 40 to 49 years, signifying a growing wage divide and wage stagnation for youths, the World Bank said.

“Our analysis identified four main factors that impact the lives of Malaysian households as they strive to make ends meet. These are geographic differences in living costs, insufficient income, inadequate financial literacy and planning, and a shortage of affordable housing,” World Bank’s country director for Brunei, Malaysia, the Philippines and Thailand, Mara Warwick, said in her opening speech at the report’s launch yesterday.

And housing affordability in Malaysia has deteriorated over the years, with housing now “severely unaffordable in several states and “seriously unaffordable” in Malaysia as a whole, the report said.

Those who feel their incomes are not keeping up with the cost of living, it noted, often opt to work more to try to make ends meet.

Addressing these factors effectively, said Warwick, will require the pursuit of a combination of short-term measures and long-term policy interventions.

“Over the short term, efforts can be exerted to re-evaluate existing price controls and better align them with the consumption pattern of the bottom 40%, to deepen social assistance benefits, to raise financial literacy and awareness of Malaysian households, and to improve information related to affordable housing.

“Over the long term, deeper structural reforms will be necessary to boost market competition to ensure an adequate supply of affordable housing and to increase people’s income levels. The only pathway to achieving sustainable income growth among households is by enhancing labour productivity, and through enabling firms to realign their own investment and hiring incentives,” she said.

Domestic Trade and Consumer Affairs Minister Datuk Seri Saifuddin Nasution Ismail, present at the event, said the challenge for policymakers is that different solutions are needed to cater to different groups with different needs.

He said the National Action Council on Cost of Living was established last year to tackle the issue of cost of living.