CLIMBING THE LADDER Socio-economic Mobility in Malaysia Muhammed Abdul Khalid 6 Dec 2016

28 Pages·2016·0.54 MB·English

by  Hawati Abdul Hamid

Closing the produc1vity-wage
gap
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Compensa1on vs produc1vity
o  Wages, or more accurately total compensa.on
per hour, increased at approximately the same
annual rate during a certain period

o  if nominal compensa.on is adjusted for
infla9on
o  in the same way as the nominal output
measure that is used to calculate produc.vity.
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•  Compensa.on vs produc.vity
In essence, rising inequality has
prevented potential pay growth
from translating into actual pay
growth for most workers. The
r e s u l t h a s b e e n w a g e
stagnation.
For future productivity gains to
lead to robust wage growth and
widely shared prosperity, we
need to institute policies that
reconnect pay and productivity,
such as those in EPI’s Agenda
to Raise America’s Pay. Without
such policies, efforts to spur
economic growth or increase
productivity (the largest factor
driving growth) will fail to lift
typical workers’ wages.
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o  Economic theory says that the wage a worker earns,
measured in units of output, equals the amount of
output the worker can produce.
o  Otherwise, compe99ve firms would have an
incen9ve to alter the number of workers they hire,
and these adjustments would bring wages and
produc9vity in line.
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Produc.vity Level, Q1 2015 to Q2 2017 (RM)
84,000
82,000
80,000
78,000
76,000
74,000
72,000
70,000
68,000
Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217
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o  The produc9vity gap is a phrase to describe a
sustained difference in measured output per worker
(or GDP per person employed) between one
country and another.
o  Produc9vity is a measure of the efficiency of factor
inputs such as labour and capital.
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Produc1vity-Pay gap
Malaysia: Compensa9on and produc9vity 1973-2006
0.025
Labour
produc9vity
0.02
0.015
Compensa9on
0.01
0.005
0
1973-2006 1973-1979 1979-1989 1989-1995 1995-2000 2000-2006
-0.005
Usable produc9vity Compensa9on
Source: various Na9onal Produc9vity Report, MPC.
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Compensa1on versus produc1vity
Similari9es:
Both are at the same magnitude of going up whether the
advance or developing countries.

Differences:
The gap between compensa9on and produc9vity keep becoming
bigger as 9me goes by showing the direc9on of both variables
over 9me.
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The lesser the CE represent the less income
(GNI) and less CE over GDP. The right hand
side are countries with higher COE compared
to the less at the leQ hand side.
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