KUALA LUMPUR: The government has been urged to stay close to the Madani spirit of efficiency and productivity by investing in a smaller but smarter bureaucracy that offers good value for money.
Prominent economist and Southeast Asia Lead for the Global Labour Organisation, Prof Niaz Asadullah, said “the evidence is not clear cut” that the increase in remuneration is required due to the rising cost of living as argued by Congress of Unions of Employees in the Public and Civil Services (Cuepacs) leaders.
“My research on a segment of civil servants confirms that they were less affected during the Covid-19 pandemic, compared with private sector individuals in terms of job stability, Employees’ Provident Fund withdrawals and loss of financial well-being,” he said.
Niaz, who is also Universiti Malaya Associate Fellow of the Social Wellbeing Research Centre, was commenting on whether the increase in civil servants’ remuneration from this December as recently announced by Prime Minister Datuk Seri Anwar Ibrahim is justified. The increase will add RM10 billion annually to federal expenditure.
He said many early career civil servants view the increase as a necessity, given the challenges caused by depressed wages. As a proportion of GDP, the total government wage bill is below the average of other countries at the same income level.
“However, the emolument-to-revenue ratio is very high in Malaysia. Civil service salaries account for more than one-third of total government revenues, and this is primarily because of an over-sized bureaucracy.”
He stressed that proposals for wage increases must go hand in hand with discussions on civil service reforms, particularly when the global post-pandemic slogan is “building back better”.
On whether they deserve a pay hike, he said street-level civil servants and front liners in sectors such as health and education may have legitimate concerns over low salaries vis-a-vis the rising cost of living.
“But there are also questions about poor service quality and performance efficiency. The 2024 World Bank Economic Monitor Report highlighted the problem of absenteeism among national school teachers in Malaysia to be as high as 40%.
“An earlier World Bank report also exposed Malaysia’s poor global ranking in terms of the quality of public institutions, compared to our aspirational peers that include Japan, South Korea and Singapore among others, as well as the expectations of our growing middle-class.
“So, while we like to be compassionate to civil servants, we must simultaneously respond to public expectations of improved service quality. Contrary to what some commentators have claimed, better pay does not guarantee performance improvement.”
Niaz said Malaysia’s GDP is projected to grow at between 4.2% and 4.8% this year.
Hence, whether the country can afford sweeteners such as this year’s payouts of RM500 Aidilfitri assistance, the RM2,000 Early Incentive Payment, and now the increase in remuneration depends on the allocation and financing mode.
“If the extra wage bill is deficit-financed, it would lead to inflation, leaving real wages unchanged and the government’s expenditure far above the estimated RM10 billion.”
He said while the official justification for increasing the remuneration is to fulfil past promises, the higher allocation is also compatible with the Madani framework which calls for “lifting the social floor”.
“With the latest increase, the minimum monthly public sector remuneration will rise from RM1,765 to RM2,000 from this December.
“But the Madani agenda also insists on efficiency and productivity relating to expenditure. The RM10 billion to finance an across-the-board increase in wages without productivity-linked measures would undermine this agenda.”
Niaz said the decision on remuneration should not be narrowly scrutinised based only on economic costs and benefits, but also in terms of higher efficiency from civil servants and better service quality and delivery.
“If performance remains unchanged, the pay raise will be another form of leakage of public funds,” he said adding that another danger is that union leaders and workers may use public sector wage increases as a benchmark for their wage negotiations.
“The national risk is greater if the RM10 billion is deficit-financed. And with inflation, more money in people’s pockets will be meaningless as only nominal wages will increase, leaving purchasing power unchanged.”
