PETALING JAYA: With just three months until December, when civil servants receive a salary increase of over 13%, economists have expressed opposing views on whether it is a good idea, considering the substantial national debt of about RM1.5 trillion.
Economist and Southeast Asia Lead for the Global Labour Organisation Prof Niaz Asadullah said the national debt, massive civil service of 1.7 million personnel and pension payouts for retirees will considerably increase the financial burden.
“The country cannot afford a pay hike as the salary increase would impose a greater financial burden on taxpayers as the costs associated with a salary raise could potentially strain the financial resources raised from taxpayers,” he said.
On May 1, Prime Minister Datuk Seri Anwar Ibrahim announced the pay hike for civil servants, marking the first review in many years.
Anwar, who is also finance minister, said under the revised Public Service Remuneration System, the government will ensure the minimum income for civil servants exceeds RM2,000 per month.
“Currently, the overall minimum income, comprising salary and fixed allowances, stands at RM1,795 per month.
“The highest salary increase was 13% about 12 years ago and this time, the government will ensure the increase surpasses that figure,” Anwar said.
Niaz said the government might fund the pay hike through increased taxes or higher borrowings, which would mean further growing the national debt or reallocating budgetary resources.
“Additional financial pressure will only contribute to a higher cost of living as the government seeks ways to fund its obligations.”
He said the government should pay more attention to improving the quality and efficiency of public services to ensure taxpayer resources are effectively utilised, and citizens receive services that meet their expectations.
However, Malaysia University of Science and Technology economist and lecturer Prof Geoffrey Williams said the government can afford the pay hike, but only if it cuts spending elsewhere.
Williams said civil servants, including teachers, nurses, social workers and those in essential services such as firefighters and ambulance workers are currently underpaid, so the salary hike would support those who deliver essential services.
“Currently, civil service wages are RM95.6 billion, or 31.5%, of operating costs. Adding civil service pensions of RM32.4 billion raises the figure to RM128 billion, or 42.1%, of spending, according to Budget 2024.”
Williams said the pensions Bill will also rise in tandem with salary hikes, adding that this will remain for existing civil servants but the plan to put new hires on the Employees Provident Fund scheme will solve this problem.
“If the government insists on raising civil service salaries, it should first concentrate on lowering debt, halting borrowing, cutting wastage, leakage and corruption and pushing its subsidy rationalisation and fiscal reform agenda.
“Cutting the cost of living is difficult because prices will not come down. So, raising incomes should be the key priority for the government.”
Putra Business School lecturer Assoc Prof Dr Ida Md Yasin said although there is an increase in the budget, the government still needs to consider the rising cost of living.
She said even with the pay hike, a RM2,000 minimum salary for civil servants is still low and requires the government to find better ways to support the people.
“Considering the current cost of living, a minimum salary of RM2,000 might not make much of a difference to civil servants. That kind of salary might be fine for a single person living in the city, but not for someone with a family.
“Instead, the government should narrow the gap between the rich and the poor by ensuring the people can cover their basic needs while also imposing higher taxes on the excess wealth of the rich.”
