PETALING JAYA: Malaysia has seen a steady growth in labour income share by almost 5 percentage points to 35.3% for the past six years from 2010 to 2016, according to MIDF Research.
The increase in labour income share signals that employees are getting a larger share of corporate income generated and it is expected to hit 40% by 2020 from 35.3% in 2016, reflecting the fact that Malaysia is moving closer towards developed nation status.
Most of developed economies show labour income share ranging from 45% to 55%, which probably explains why domestic spending in these economies is significant in driving up domestic economic activity, it said.
MIDF Research noted that the labour income share rise is attributable to the implementation of the new minimum wage RM1,000 per month in Peninsular Malaysia and RM920 per month for Sabah and Sarawak in 2016, among others.
However, Malaysia’s corporate earnings share, which is reflected by gross operating surplus, declined from 64.6% in 2010 to 59.5% in 2016.
“In simple words, for every RM1 generated in 2016, 35.3 sen was paid to the employee and 59.5 sen went to corporate earnings while another 5 sen was received by the government,” said MIDF Research.
The research house highlighted that income growth of the low income group grew faster than that for other groups after the global financial crisis in 2008. Income growth of the Bottom 40 (B40) for the period of 2012 to 2014 was 17.2%, while Middle 40 and Top 20 recorded only 11.3% and 8.2% respectively.
“We believe the upward trend in income growth of the B40 as well as other groups was driven by the policy reform undertaken by the government to address the income inequalities gap. In addition, we foresee the momentum in income growth for all groups will sustain due to the increase in the share of labour income and government revenue in 2016,” it said.
MIDF Research said the services sector remained as the biggest contributor for labour income at 21.4% in 2016.
The most notable rise is in the manufacturing and construction sectors as the labour income share rose from 7.5% and 2.5% in 2010 to 8% and 3.6% in 2016, respectively.
“Therefore, with the improving trade activities and construction of infrastructure projects in Malaysia, we can expect the labour involved in the manufacturing and construction sectors to benefit by receiving higher wages and salaries,” it noted.
Source: The Sun Daily