The numbers that tell a different story – Dzulkefly Ahmad
So what do Prime Minister Datuk Seri Najib Razak’s 6.4% growth number and Minister Datuk Seri Abdul Wahid Omar’s RM5,900 a month average household income have in common? We shall later see.
Malaysia’s economy grew faster than expected at 6.2% in the first quarter and 6.4% in the second quarter this year. Growth is said to be driven by stronger expansion in domestic demand and a turnaround in net exports.
Najib concluded that the economy was “on the right track” and wanted the Umno leadership “to go down to the grassroots and explain the country’s economic success so that the people understand and appreciate it better”.
But the government didn’t quite realise that the rakyat are still reeling from the rising cost of living following the double whammy of subsidy rationalisation and the cascading effects of petrol and utility tariff hikes on so many goods and services.
While the link between economic growth and human well-being seems obvious, there has been a rising disconnect between a country’s per-capita GDP and its citizens’ well-being due to “unsustainable development”. To paraphrase the Nobel laureate Simon Kuznets (1934), “the welfare of a nation can scarcely be inferred from a measure of national income”.
This is not, however, to deny the fact that GDP provides valuable information about a country’s production, expenditure and income stream, much as it measures the flow of goods and capital across borders.
Additionally, Wahid’s announcement that the average household income has surpassed RM5,900 a month according to the latest statistics, if not well explained, could be another “meaningless” number that is neither significant nor relevant to the immediate life of the ordinary rakyat.
Many could very well feel “alienated” as they are nowhere near the household income of “average” Malaysians.
Incidentally, 80% or 7.9 million households were reported to be recipients of BR1M 3.0 in 2014, while 5.3 million were beneficiaries in 2013. Only households with incomes of less than RM4,000 are eligible. That is very telling indeed of the “average income” of many Malaysians.
While Wahid could mean well, he should not overlook the fact that the 2012 Household Income and Basic Amenities Survey (HISBA) in 2012 had already registered that the average Malaysian household was RM5,000.
Yes, it has indeed registered an 18% increase or a 9% average annual growth increase going by his revelation. Yes, the number looks good too and certainly above GDP growth of 5.1% for 2013. But so what, many income earners may ask?
the average income figure is skewed by the very rich.
Going by the 2012 HISBA, the median monthly household income was RM3,626 (as compared with RM5,000 as average). However, the top 20% has an average income of RM12,159, the middle 40% has RM4,573 and the bottom 40% has RM1,847.
Wahid would have been seen as more honest and cool had he been more willing to disclose the actual median monthly household income for 2014. But could he?
Presumably, he couldn’t because these statistics would only be available by year end. So why rush to announce the average income?
Perusing the 2012 data, it is hardly surprising for Malaysians to be told that we have one of the worst income distributions in the region.
Incidentally, our Gini coefficient, a measure of inequality of income distribution, is worse than that of Thailand and Indonesia while equal to that of the Philippines.
A better and more revealing measure of economic inequality is in fact that of “functional income distribution” – the percentage of GDP going to wages of labour compared with capital.
Thomas Piketty’s Capital in the 21st Century has compellingly argued that rate of return on capital (r) exceeds the overall rate of growth (g) over the last two decades in the US and elsewhere in the West to varying degrees.
The conclusion that r>g inevitably results in the concentration of both income and wealth on those who own capital as compared with those who mainly own labour. Studies in four of five selected Asian countries, for example, have shown that labour or wage share of GDP has declined over the last few decades.
* Dr Dzulkefly Ahmad is executive director of the PAS Research Centre and former MP for Kuala Selangor.
* This commentary first appeared in this week’s issue of The Edge Weekly.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.