I’ve come across the same dilemma myself, but a box article in BNM’s 2014 Annual Report outlines the latest data (excerpt; emphasis added):
…In terms of share, capital income forms the largest component of GDPI (Chart 3). However, with the growth of labour income outpacing the growth of capital income, the share of labour income to GDP has risen steadily from 29.5% in 2005 to 33.6% in 2013. By definition, however, the labour income component in GDPI excludes income earned by self-employed individuals…With such adjustments, the share of labour income for Malaysia is higher, on average, by 8.0 ppt. throughout the period (Chart 4)….
...Despite the rising trend, the labour income share in Malaysia, even after accounting for the income of the self-employed, remains relatively low compared with other upper-middle income economies (Chart 5). Within the region, Malaysia’s adjusted labour income share (42.1%) is lower than Korea (54%) and Singapore (44%).
While this may be a cause for concern, it is important to note that a higher share of labour income does not necessarily correspond with higher average wages. As noted in both Chart 5 and 6, Brazil and India, for instance, have higher labour income shares than Malaysia, but lower average monthly wages. On the other hand, Singapore has a relatively low labour income share, but a high average wage level. Of significance, most advanced economies tend to have both high average salaries as well as higher labour income shares….
…Chart 7 provides a snapshot of the adjusted labour income shares and average wages5 across industries in Malaysia. Similar to the cross-country observations, the variations in labour income shares across industries do not necessarily correspond with the variations in average wage levels. For example, the share of labour income in the labour-intensive industries tends to be higher than average, but the average wage levels are lower than the national average….
I call this a dilemma, because targeting a higher employee compensation/GDP ratio is not the same as raising wages. The sectors with the highest wages (e.g. oil & gas) also tend to have lower COE ratios; conversely sectors with higher than average COE ratios also show average wages lower than the national average. If you don’t understand how something came to be, it’s tough to figure out what policy levers to pull.
The article suggests that higher productivity will tend to drive higher average wages. I won’t dispute that or disagree with it, but I don’t think the matter is that simple – advanced economies have both higher COE ratios AND higher wages. For that matter, what explains the different labour income shares between Singapore (which has higher “productivity”) and Korea? Higher productivity increases the size of the pie, but we still need to look at how the pie is divided as well.
I’m grasping towards the idea that these cross-sector and cross-country differences could be due to different institutional incentives and attitudes towards savings and investment versus consumption on the one hand, and labour/capital bargaining power on the other, but my modelling skills just aren’t up to figuring that out yet.