This article first appeared in Wealth, The Edge Malaysia Weekly on July 24, 2023 - July 30, 2023

The proportion of wages to gross domestic product (GDP) in Malaysia has fallen significantly in recent years.

In a fireside chat organised by Hong Kong-based insurer FWD Takaful Bhd and social enterprise Arus Academy, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar pointed out that the proportion of wages to the GDP of Malaysia has fallen to about 25% in recent years from its highest point of 37% in 2017. The recent figure was even lower than in 2010.

“Back in 2010, our wages as a percentage of compensation were very low at 29%. Over the years, as part of the new model and inclusive growth policy, the government targeted to increase the proportion of wages to GDP, which resulted in an increase of 32% to 33%, with the highest point of 37% in 2017. But, unfortunately, it seems the percentage has come down to about 25% in recent years,” he said.

Thus, saving and investing have become challenging for Malaysians in general, as they do not earn enough. This is exacerbated by rising inflation.

“Unfortunately, looking at the statistics by the Employees Provident Fund this year, 71% of the 8.39 million active EPF contributors do not have enough funds for retirement, with half of them earning less than RM3,000 a month,” Wahid said.

The saving grace is that the purchasing power of Malaysians remains relatively strong, partly reflected in the Big Mac Index, which compares the relative price worldwide of McDonald’s Big Mac hamburger. The index is often used as an informal way of measuring the purchasing power parity between two currencies.

Meanwhile, Wahid noted that youths in Malaysia do not lack access to financial literacy avenues. As financial literacy is a living skill, it is the responsibility of the government to make sure that every single Malaysian is financially literate, he added.

“Nowadays, financial literacy is being embedded in more subjects in schools to get the syllabus in line with the times. However, there is also a need for non-curricular programmes and short courses to help supplement the national efforts in school, with the support of industry players such as the central bank, the Securities Commission and financial institutions,” he said.

FWD Group Holdings chairman Frederick Ma Si-hang added that financial education must begin at home to ensure that youths are well equipped with adequate knowledge of money management.

“Parents should start teaching their children from as young as possible. The moment the children learn how to count, parents should start to inculcate in them the knowledge and value of money. This can be done, for example, when they receive their first money packets during celebrations.”

The event also kick-started the Fun(d) for Life camp, organised by the Arus Academy, to shape a financially smart generation. The camp will be held in October, which is the annual financial literacy month.

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