4. Khazanah
Research
Institute
4
Datasets and Variables
Dataset Study Period Unit of Analysis
Salaries and Wages Survey (SWS) 2010-2019 Wage-earning worker
Wage variable = basic wages + bonuses and allowances
Real wage variable = expressed in 2021 ringgit after adjusting for inflation
6. Khazanah
Research
Institute
Overall results
6
Source: DOS (2023), authors’/KRI calculations
Notes: Household wages are in real 2021 terms
Percentage change in real monthly individual wage, by decile, 2010 – 2019
20
25
30
35
40
45
50
55
60
65
1 2 3 4 5 6 7 8 9 10
65%
Progressive
Neutral
“Squeezed
middle”
Regressive
7. Khazanah
Research
Institute
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8 9 10
12%
MW
Non-MW
7
Source: DOS (2023), authors’/KRI calculations
Notes: Household wages are in real 2021 terms
Percentage change in real monthly individual wage, by decile, 2010 – 2019
Non-MW wage growth
becomes broadly regressive,
consistent with
decomposition analysis
MW significantly
increases relative
growth for low wage
workers, but effect
quickly dissipates
towards median
Wage growth for low wage workers is dependent on the
minimum wage
1
8. Khazanah
Research
Institute
8
Source: DOS (2023), authors’/KRI calculations
Notes: Household wages are in real 2021 terms
Percentage change in real monthly individual wage, by decile, 2010 – 2019
20
25
30
35
40
45
50
55
60
65
1 2 3 4 5 6 7 8 9 10
65%
Progressive
Neutral
“Squeezed
middle”
Regressive
0
50
100
150
200
250
300
1 2 3 4 5 6 7 8 9 10
MW
Non-MW
RM300
“Squeezed middle” - median
earners experience lowest
absolute growth in MW impact
periods
Absolute/RM change in real monthly individual wage, by decile, 2010 – 2019
“Squeezed Middle” – middle earners faced the slowest wage
growth
2
9. Khazanah
Research
Institute
9
Source: DOS (2023), authors’/KRI calculations
Notes: Household wages are in real 2021 terms
Wage stagnation a persistent reality even after the
implementation of the minimum wage
3
0
500
1,000
1,500
2,000
2,500
1 2 3 4 5 6 7 8 9 10
RM2,500
Wage stagnation: annual real
increase of only ~RM 56 for
whole of bottom 50%
Absolute/RM change in real monthly individual wage, by decile, 2010 – 2019
28.7
16.5
43.7 54.6
0
20
40
60
80
100
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
> RM5k
RM3k - RM5k
RM2k - RM3k
RM1k - RM2k
< RM1k
100%
Percentage of working graduates, by monthly income range, 2010 - 2020
Source: MOHE (various years), KRI calculations
13. Khazanah
Research
Institute
13
The Expenditure Space
The Result: Classifying Households by Consumption Traits
Product Description Aspirational Traits
Insurance premium on
property, accidents, education
Capability to insulate from
adverse risk events
Hiring professional services:
domestic servants, security
services and other services
Capability to get other people
to manage tasks, freeing up
time for themselves to perform
other functions
Conspicuous goods: vacation
packages, paintings, artificial
flowers, wine, whisky,
reflexology and massages
Possessing the commodities
that signal ‘class’ and give
themselves a sense of
exclusivity
Consumption characteristics of the aspirational class
Source: Adapted based on Jayadev, Lahoti et al. (2015) and Currid-Halkett (2017)
14. Khazanah
Research
Institute
14
Preliminary Findings: Updated Expenditure Space
Continuity in the structure of Malaysian Co-Consumption probabilities
2009 2014 2016 2019
• Most items remained in the same categorization in the 2009 – 2019 period.
• The items that exhibited changed in categorization were:
• Aspirational to Essential: Fresh And Reconstituted Milk, Margarine, Peanut Butter, Fuels And Lubricants For Personal Transport
Equipment
• Essential to Aspirational: Tobacco
15. Khazanah
Research
Institute
15
Preliminary Findings: Updated Expenditure Space
However, there were notable changes to standard of living at the bottom, and changes in proportion of households
categorized exhibiting aspirational consumption
Note: Number of products consumed quantified using Revealed Comparative Advantage (RCA). A product is only counted when households spend greater than structural expenditure
0
10
20
30
40
50
60
70
80
90
100
d1 d2 d3 d4 d5 d6 d7 d8 d9 d10
2009 2014 2016 2019
• Over the past decade, households at the bottom 10% experienced
an increase in Standard of Living twice between 2009 – 2014,
and between 2016 – 2019:
o During which, they mainly consumed more food, clothing and
household utensils.
o Standard of Living fell between 2014 – 2016, during which
B10 households spent less on household utensils
• Conversely, over the same decade, households in ‘the middle’
exhibited relatively stable consumption patterns:
o They consumed a wider range of food items, and acquired a
greater diversity of household utensils
• Additionally, aspirational consumption remains an exclusive trait of
households in the top 30%.
Count of the number of products consumed
17. Khazanah
Research
Institute
17
Minimum
Wage
Zone
Wage
Setting
Zone
Wage Policies Median Mean
• Centralised wage setting, which mandatorily sets wage floors for each occupation based on skills and experience, will be
required to raise wages for the middle groups.
• Our current approach is largely “wait for productivity to grow, and then wages will grow”. But wage suppression incentivizes
businesses to adopt and maintain business models premised on cheap labour, making the productivity trap worse.
• We must raise wages centrally, and mandatorily, in order to reincentivize the business environment in Malaysia to move
towards more capital, knowledge and skills-intensive forms of production.
• We must recast wages as being a source, and not merely a consequence, of economic and business transformation.
Increasing wages (RM)
% of
workers
18. Rachel Gong, PhD
Budget 2024 MOF Focus Group
6th September 2023
State of Households:
Digital Inclusion
19. Khazanah
Research
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19
Meaningful internet access
linked to economic outcomes
Source: DOSM (2022)
Photo: Suzianah Bidin
State
Median monthly
household income (RM)
Households with fixed
broadband access (%)
Malaysia 6,338 46.4
WP Kuala Lumpur 10,234 73.6
WP Putrajaya 10,056 73.7
Selangor 9,983 59.3
WP Labuan 6,904 41.6
Johor 6,879 52.3
Pulau Pinang 6,502 54.9
Melaka 6,210 55.2
Terengganu 5,878 27.9
Negeri Sembilan 5,226 46.8
Sarawak 4,978 32.2
Pahang 4,753 31.1
Perlis 4,713 31.5
Sabah 4,577 30.6
Perak 4,494 39.5
Kedah 4,402 34.3
Kelantan 3,614 23.7
Median monthly income and fixed broadband access for households in
Malaysia, 2022
20. Khazanah
Research
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20
Policy recommendations
Budgetary measures: Measures that require financial allocation
Non-budgetary measures: Measures that may not require financial allocation
Malaysia MADANI objective Recommendations
Budgetary/Non-budgetary
measure?
A. Quality and affordable
internet services
1. Expand access to the USP fund Non-budgetary
2. Provide grants for last-mile connectivity in targeted areas Budgetary
B. Digital revolution in
government
3. Design user-centric public digital systems Non-budgetary
4. Improve digital infrastructure in public healthcare facilities Budgetary
C. All of Malaysia approach:
Memperkasa Rakyat
5. Mainstream cybersecurity, data privacy, and information
disorder risks
Budgetary
21. Khazanah
Research
Institute
21
1. Expand access to the USP Fund
Sources: USP Annual Reports (2006 – 2021), Gong and Azlin (2023), Gong (2023)
Abbreviations: Universal Service Provision (USP) Fund, Jalinan Digital Negara (JENDELA)
Non-budgetary
The goal is to improve the usefulness of the USP Fund in order to close Malaysia’s digital divide. Consider expanding access to the Fund to local
communities and partnering NGOs, subject to appropriate scrutiny and monitoring.
• Established in 2002, the USP Fund has funded infrastructure
development initiatives through JENDELA (~RM 8.6b), device
distribution through numerous initiatives and community outreach
via initiatives such as community internet centres.
• However, the Fund has untapped potential in light of Malaysia’s
digital transformation.
• Jalinan Digital Negara (JENDELA) was announced in 2020 to address
the short term needs of the pandemic and the nation’s long term
digital development goals with 40% of the projected RM21.6b cost
reported to come from the USP Fund.
• Currently, USP funds are only allocated to approved project proposals
coming from conributors to the fund.
• Essentially, this means that funds cannot be accessed by non-telcos
without partnership with the telcos.
Background Current policy
• We propose to expand access to the USP Fund to allow NGOs and
other non-contributors to the Fund to draw on these funds for projects
in line with the Fund’s objectives either in partnership with contributors
or independently.
Proposal
0
2
4
6
8
10
12
2006 2008 2010 2012 2014 2016 2018 2020
RM12b
Accumulated
funds
Annual income
Annual
expenditure
USP Fund Use, 2006–2021
22. Khazanah
Research
Institute
22
Sources: DOSM ICT Household Survey (2019–2023), Gong (2023)
The goal is to improve last mile connectivity in rural and remote areas that are underserved by private service providers. Consider providing grants for
NGOs and local communities to work on last-mile connectivity projects, such as community networks, in these areas.
• Highest rural population in 2020: Sabah (1.55m), Sarawak (1.05m)
Kelantan (1.00m), Johor (0.91m), Pahang (0.75m)
• There is an acknowledged lack of profitability for last-mile
connectivity in rural and remote areas.
• Community networks are a way for local communities to find their
own last-mile connectivity solutions.
• To the best of our knowledge, there are no existing government
initiatives for community networks in Malaysia.
• Community networks are being trialled in Sarawak by UTS who have
partnered with state agencies, private companies and local
communities to install last-mile connectivity infrastructure.
• Sustainable backhaul access remains a challenge.
Background Current policy
• We propose that grants be made available to NGOs and local
communities to work on last-mile connectivity projects, such as
community networks, in underserved rural and remote areas.
Proposal
Urban/rural comparison of household fixed broadband access, 2019–2020
2. Provide grants for last-mile connectivity in
targeted areas
Budgetary
23. Khazanah
Research
Institute
23
Source: GAMMA (2023), Loke and Gong (2022)
Non-budgetary
The goal is to aid digital transformation and adoption by improving ease of use. Wherever possible, consider providing mobile web-based
services, instead of mobile apps that require users to download and register multiple times, and stress-testing workflows of online processes prior
to public rollout.
• Despite efforts to digitalise the public sector, some bureaucratic
processes are not user-friendly, let alone OKU-friendly.
• The tendency to use mobile apps for basic services, e.g. taking a
ticket number, instead of mobile web services, shifts the burden to
the individual.
• Furthermore, some public services, e.g. paying for street parking,
have shifted entirely to apps, leaving those with limited digital
access and experience behind.
• Increasing adoption of digital technologies and utilising digital tools to
improve efficiency and productivity is one of the public sector digital
transformation goals in the Digital Economic Blueprint 2021.
• An objective under the MADANI framework is to improve efficiency in
the government’s decision-making and delivery of public services.
• GovTech Malaysia has been announced, but there have been limited
details on platform or process design and integration with existing
systems.
Background Current policy
• We propose that digitalisation of the public sector prioritise web-based
services designed for mobile user interfaces, and stress test new
online processes to assess ease of use before public roll out.
Proposal
3. Design user-centric public digital systems
222
Malaysian
Government
Mobile
Applications in
2023
>40 million downloads
>1.5 million downloads
>1.2 million downloads
Top 3 most
downloaded
government
applications
24. Khazanah
Research
Institute
24
Sources: Ilyana (2021); EPU (2021); MOH (2023); Lim, Ilyana and Gong (forthcoming)
The goal is to lay the groundwork for the adoption of electronic health records especially in rural health facilities. Consider allocating funding for the
provision of digital infrastructure, including internet connectivity and computers, in public healthcare facilities.
• “Legacy hospitals” were not built to cater to digital needs. They
lack devices as well as physical infrastructure to accommodate
healthcare digitalisation.
• Poor internet connectivity within public healthcare facilities is a
challenge to digitalisation initiatives.
• The Twelfth Malaysia Plan highlights maintaining healthcare services
using a “repair, replace and restore” approach to improve aged
healthcare facilities, particularly those that are above 50 years old.
• It also includes the rollout of electronic medical records as a strategy
to leverage emerging technologies in reducing costs and unnecessary
procedures.
• The Health White Paper 2023 also emphasises upgrading hospital
information systems and electronic medical records to achieve
optimisation of hospital care.
Background Current policy
• We propose that funding be allocated towards improving internet
connectivity and hardware provision in public healthcare facilities,
especially those located in non-urban areas.
Proposal
Budgetary
4. Improve digital infrastructure in public
healthcare facilities
25%
of 146 public
hospitals in
Malaysia have a
digital system
9%
of 1,090 public
clinics in
Malaysia have a
digital system
25. Khazanah
Research
Institute
25
Sources: KRI (2021), Bernama (2022).
The goal is to raise public awareness of digital risks and safeguards so the public can be on guard against scams and misinformation and know what to
do should they be targets or victims of fraud. Consider allocating funding for public awareness campaigns targeting seniors who are most at risk.
• Online risks, from scams to online harassment to misinformation,
are on the rise.
• Over 30,000 online crime cases were reported to PDRM in 2021–
2022.
• Factchecking is limited in Malaysia, despite the provision of
sebenarnya.my, due to lack of funding and human resources.
• The PDPA 2010, which does not cover non-transactional or
government data, is currently being revised.
• The NSRC was established in 2022 with a hotline (997) for the public
to report scams.
• The Anti-Stalking Law which includes online harassment and
cyberstalking, was passed in 2023.
• The government has made significant efforts towards improving digital
security but the public may not be aware what they can do to avoid
falling prey to online threats or how to report incidents.
Background Current policy
• We propose funding be allocated for public awareness campaigns
beyond mass media, e.g. signage on highways, in non-urban areas,
in community centres, markets, clinics and houses of worship,
targeting seniors who are most at risk.
Proposal
Budgetary
5. Mainstream cybersecurity, data privacy and
information disorder risks and safeguards
26. Khazanah
Research
Institute
26
Policy recommendations
Budgetary measures: Measures that require financial allocation
Non-budgetary measures: Measures that may not require financial allocation
Malaysia MADANI objective Recommendations
Budgetary/Non-budgetary
measure?
A. Quality and affordable
internet services
1. Expand access to the USP fund Non-budgetary
2. Provide grants for last-mile connectivity in targeted areas Budgetary
B. Digital revolution in
government
3. Design user-centric public digital systems Non-budgetary
4. Improve digital infrastructure in public healthcare facilities Budgetary
C. All of Malaysia approach:
Memperkasa Rakyat
5. Mainstream cybersecurity, data privacy, and information
disorder risks
Budgetary
Editor's Notes
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