The prime minister said a few things recently on low income and high cost of living when answering a question in Parliament.

He said the Goods and Services Tax is not really the culprit, it is low education attainment which limits the earning potential of the people. He also said some Malaysians are living beyond their means, rendering them to cost of living pressure. According to him, the government has provided sufficient allocations to relieve the hardship of the people, as manifested through larger allocations to the poorer states such as Kelantan.

First, I think we must note the difference between ‘low income’ and ‘high cost of living’. They are governed by different factors. Low income is bearable if cost of living has not escalated out of control.

While we may attribute low income to low education and skill attainments, it is escalating cost of living that is doing the damage today. There are many factors that contributed to inflation and high cost of living - higher taxes, ringgit depreciation (and hence resulting in higher interest rates and import prices), subsidy rationalisation, indiscriminate transfer payments, lopsided income distribution, and the damage caused by the unproductive sectors.

In all these, monetary policy plays a big part and unless we manage money supply and inflation prudently, no amount of income growth will be able outstrip higher cost of living.

Of course the added whammy is the unfettered entry of foreign workers, which further displace the less-educated Malaysians.

I think big government and oversized civil service are the major factors that contribute to high cost of living. The government pays itself and the civil service too much vis-à-vis the real contributions they provide to the economy. If unproductive sectors get too much, the consequence is inflationary. This is basic economics, but I guess we will never admit it.

I agree the government has always focussed their expenditures on the rural areas and the poorer states. But this is on paper only. In reality, we must seriously look at the way the allocations are spent. Have we looked at the leakages and the true beneficiaries of government spending? One example, rural schools and clinics without proper teachers and doctors benefit the building contractors more than the rural population.

In any economy, there are high- and low-paying jobs. But this does not mean that low-income earners will not be able to sustain themselves, unless of course cost of living and inflation are allowed to run wild.

Living beyond their means

I agree with the observation that some Malaysians are constantly living beyond their means. They are caught in a lifestyle that is not realistic given their income level. To this group of people, they must either change their lifestyle or find a better paying job.

But as a policy-maker, the PM should not be concerned with exceptions. He should rightly be concerned with the general trend. Those who chose to live beyond their means by being extravagant or unrealistic should eventually find their own solutions.

As a policy-maker, he should focus on managing inflation, preserving the value of ringgit, right sizing the government and the civil service, determining the optimal number of foreign workers given our economic structure and unemployment, and ensuring the effectiveness of government spending and the efficacy of government social programmes.

It is my considered opinion that there are now too many ‘1Malaysia this and that’. I don’t think we can manage a modern economy this way; it is just so third world and nonsensical.

We must seek solutions, not provide excuses to the malaise we face.