Indeed, he said the narrowing of income gap (here) is an imperative towards the sustainability of economic development which has to tie in to social development of the people of any country.
Widening income inequality can be a major obstacle to the unity and solidarity that '1Malaysia' envisions. Since Merdeka in 1957, the top 20 per cent of income earners in Malaysia have benefited much more from economic growth than the bottom 40 per cent.
It is significant that the report of the National Economic Advisory Council (NEAC) on the New Economic Model (NEM) admits that, 'The bottom 40 per cent of households have experienced the slowest growth of average income, earning less than RM 1,500 per month in 2008.'
The wage trend in Malaysia recorded only an annual 2.6 per cent growth during the past 10 years, compared to the escalating cost of living during the same period. It explains why almost 34 per cent of about 1.3 million workers earn less than RM700 a month, below the poverty line of RM720 per month – a point emphasised by the Minister of Human Resources, Dr S Subramaniam, recently, as written by Dr Chandra Muzaffar (here).
Many economists and sociologists today feel that the term 'minimum wage' itself, which is the product of an earlier era, should be replaced with the term ' living income' and linked to the dignity of the human being.
A living income, according to him is a minimum level of income by which all human beings can provide for themselves and their dependents the five basic material human needs – food, housing, clothing, health care and education. These needs are vital for protecting human dignity.
The United Nations (UN)’s recent report on the Economic and Social Survey of Asia and the Pacific, urged governments to increase their social spending and invest more in their own societies to ensure a more equitable development of their economies.
There are economic benefits by doing so: By lifting more of their own people out of poverty and improving the income status of their citizens, the larger the consumer class and developed markets that countries could create for the future.And the humane side of the argument is summed up well by UN Resident Coordinator for Malaysia, Kamal Malhotra, who says: “Economic development is not solely about numbers, trade, finance and wealth creation, but it is also about the welfare of the people.”
Economists say a country’s prosperity should benefit its people on the overall, not just the selected few, otherwise development will not bring much meaning.
In the case of Malaysia, its quest to become an advanced and high-income economy by the year 2020 has to be accompanied by efforts to enhance the social mobility of its people. As it stands, the gap between the rich and poor in the country remains wide, even though the overall poverty rates have been reduced significantly over the years.
It is estimated that around 4 per cent of all Malaysians, and more than 7 per cent of rural Malaysians, are currently still living below the poverty line. The bottom 40 per cent of households, on average, earn less than RM1,500 per month.
“Having 40 per cent of the country’s households in the low-income category is definitely a stumbling block to becoming a high-income, industrialised nation,” says Tan Sri Ramon Navaratnam, chairman of ASLI Centre of Public Policy Studies and former Treasury deputy secretary-general (here).
In encapsulating the principles of the NEM, Datuk Seri Idris Jala used to say: “Let us all be rich (earning high income), everyone together (inclusiveness), not just for one day or two, but for generations to come (sustainability).”
But, can we?