Pay increase to achieve High income status?
If the solution is so simple, then even Nigeria, Myanmar would be HIgh Income countries by just increasing the pay of its civils service and forcing its private sectors to increase pay for all Nigerians or Burmese.
By Dr. Hsu
The Star carried a news report today that a Deputy minister said this:
A pay increase for over one million civil servants is one of the key ingredients in ensuring the success of the New Economic Model (NEM)….
He said this was to ensure that the NEM’s objective of transforming the country from a middle-income economy to that of a high-income would improve the public sector’s productivity, thus ensuring successful development.
“Singapore shifted to a high-income economy several years ago by setting high pay for civil servants, which has succeeded in improving its economic performance.
“So civil servants in this country cannot be ignored,” he said
I thought that was a very simplistic view of how to transform Malaysia from a middle income country to a high income country.
Increasing the pay of the civil servants without increasing the productivity and ensuring that there is a matching growth of the economy will only make the country incur more debts.
Say if there is an increase of pay without increase in economic activity and growth, the operating budget of the government will increase , and this increase will either come at the expense of the smaller development budget or making the budget deficits bigger. If the budget deficits is bigger, then we need to borrow more to fund the deficits, and ultimately the country will be in a bad financial state. If the development budget is smaller, then we cannot fund projects to stimulate our economic expansion.
It is like a company suddenly raising the staff’s salary across the board without any increase in its revenue and profits. So whatever increase will be from either its reserve or borrowing. This will ultimately affect the balance sheets and the shareholders will suffer .
If the solution is so simple, then even Nigeria, Myanmar would be HIgh Income countries by just increasing the pay of its civils service and forcing its private sectors to increase pay for all Nigerians or Burmese.
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