Fact Check: Wages And Inflation

I seem to be taking a lot of pot-shots at Rafizi lately; perhaps its because he makes it so easy (excerpt):

Kadar naik gaji Malaysia 2.6%, Indonesia 10%, dakwa Rafizi

Kadar kenaikan gaji pekerja di negara ini hanya sekitar 2.6% sahaja jika dibandingkan dengan Indonesia yang menerima kenaikan empat kali ganda lebih baik iaitu 10% dalam tempoh lima tahun, dakwa Pengarah Strategi PKR, Rafizi Ramli.

Dalam wawancara eksklusifnya dengan Selangorkini, Rafizi berkata, lebih memburukkan keadaan ialah peningkatan kos sara hidup yang berlaku tidak selaras dengan kadar kenaikan gaji yang perlahan.

“Kita lihat Singapura kadar perkembangan ekonominya kukuh tumbuh dengan baik, gajinya naik. Kita lihat Indonesia pula kadar kenaikan gaji 10% dalam tempoh lima tahun berbanding kita 2.6%, maksudnya kadar gaji di Indonesia empat kali ganda meningkat lebih cepat berbanding kita.

“Apabila kita lihat pula hasil perkembangan ekonomi rakyat negara lain gaji naik, harga barang tidak meningkat dengan banyak dan mendadak, taraf hidup bertambah, perkhidmatan seperti sekolah dan sebagainya menjadi lebih baik, tetapi di Malaysia pula makin menurun.

“Bukan sahaja di Asia Tenggara, tetapi negara lain di seluruh dunia yang sumber dan kekayaannya sama lebih kurang seperti Malaysia juga keadaannya lebih baik. Trend ini sangat merisaukan kita,” katanya.

I have no idea where the 2.6% or 10% figures comes from – if anybody knows, point them out to me.

However, I do have data on Malaysian manufacturing wages, and they’re nowhere that bad:

Over the sample period, which is approximately 5 years, the compound annual growth rate works out to about 7.0% per annum. Even if we take growth averages rather than compound growth, wage growth comes in at around 5.5%. Manufacturing tends to be better paid than most other sectors, but still…

Be that as it may, even if we take Rafizi’s numbers at face value, the statement that “harga barang tidak meningkat dengan banyak dan mendadak" in other countries is wholly false.

The following table shows the CPI index numbers from 2008 to 2013, as compiled by the IMF for the three countries in question:

	2008	2009	2010	2011	2012	2013f	CAGR
Indonesia	113.86	117.03	125.17	129.91	135.476	148.393	5.4%
Malaysia	98.1	99.1	101.2	104.2	105.933	108.052	1.9%
Singapore	101.179	100.41	104.393	110.173	114.571	116.733	2.9%

In case anyone wonders how accurate these figures are, I’ve cross-checked against national sources, and they’re correct. Most would probably argue that the CPI doesn’t really reflect “true” inflation – but if that’s so, it would be true for all three countries. The methodology used is virtually identical.

Indonesia may have higher wage growth, but they suffer from much higher inflation. Even Singapore has higher inflation than Malaysia – and their property prices are even frothier.

On the growth front, Indonesia’s economy has grown 32.4% in real terms from the end of 2008 to 2013, Singapore 25.6%, and Malaysia 23.0%. The CAGR works out to 5.8%, 4.7% and 4.2%.

I wouldn’t take these growth numbers with any kind of seriousness though, as both 2008 and 2009 were recession years for Malaysia and Singapore (Indonesia’s economy is domestic demand driven), so any growth metric using those years will be highly skewed.

The same criticism applies to inflation, but here the conclusions generally hold – from my own data, the price level in Singapore and Malaysia have moved virtually identically (overall prices are about 35% higher than in 2000), while Indonesia’s inflation is in another time zone (180% higher than in 2000). The only other country in this region with higher inflation is Vietnam, but only by a hair.

The BOI has done a great job in bringing inflation in Indonesia down, but they’ve still got a ways to go before bringing it anywhere near ASEAN norms (for the curious, Thailand is at 42% higher than in 2000, the Philippines is at 78%).

Maybe we should let salaries for Parliamentarians and Assemblymen to go up – then they might actually be able to afford research assistants to check their facts for them.

Technical Notes:

1. Manufacturing wages and employment data taken from various issues of Monthly Manufacturing Statistics from the Department of Statistics
2. CPI data taken from the October 2013 World Economic Outlook database