Thursday, October 20, 2011

Productivity Growing; Wages, Not So Much

From yesterday’s news (excerpt):

M'sia on track for 4.7% labour productivity growth

PETALING JAYA: Malaysia is on track to achieve the target of 4.7 per cent growth in labour productivity this year, said International Trade and Industry Deputy Minister Datuk Mukhriz Mahathir.

He said Malaysia's productivity level or output per employee last year at US$13,577 was 3.3 times higher than China's and 4.7 times higher than Indonesia's.

"However, comparisons with the productivity levels of more advanced countries in the region such as Korea at US$33,628 and Singapore at US$54,556 confirm that there is still room for improvement," he told reporters today after officiating the Productivity & Innovation

Conference and Exposition 2011 here today. Mukhriz said Malaysia needs to benchmark its productivity level against countries like Korea and Singapore which are doing better, adding this is where the focus on productivity and innovation comes to play…

So productivity is up; how about wages?


Doesn’t look like it’ll keep pace. To be fair, productivity tanked during the recession while wages didn’t, so there’s some catch-up involved; and I’m only looking at manufacturing wages here. But still…


  1. Maybe it's a global phenomenon. Do we know what's the wage vs productivity growth in Singapore and South Korea?

  2. I don't know about SG or KOR, but I believe you're right. Reminder to self - check OECD data.

  3. Just FYI, if I remember correctly, this is consistent with some stats that I've seen for the US and the reasoning behind it was the China factor.

  4. tanstaafl,

    I believe it goes back further than that for the US - sometime in the early 1980s in fact. China was obviously not a factor back then.

    For Malaysia, the data seems to indicate the discontinuity began after the Asian Financial Crisis, also before China really started hogging exports.

    Hmmm, maybe that last one is related - the shock to East Asia accelerated investment in manufacturing bases in China, which further depressed wage increases in the rest of East Asia. Good fodder for someone's thesis I think.

  5. Based on data from an EPI report “The Sad But True Story Of Wages In America” by economists Lawrence Mishel and Heidi Shierholz (, the divergence started in 1989.

    If I remember correctly, this coincides with the start of the wider use of PCs & computers by businesses.

    Trend accelerated in the 90's - due to access to cheap Mexican labour following the North American FTA wef 1.1.94?

    Went parabolic in late 90's - Asian Financial Crisis & China?

    Stagnant since 2008.

  6. tanstaafl,

    Yes, it's the growing inequality problem. And it's not stagnant - revised 1H 2011 show negative productivity growth, which probably means even lower real wages going forward.