They say the country’s current recovery trajectory is not likely to bring about a reversal.

Average pay in Malaysia sank 9% in 2020, the first time salaries had dropped in the 11 years since the department of statistics began keeping track. It sat at RM2,933 per month compared with RM3,224 in 2019.

Paolo Casadio of HELP University said the factors that likely caused the drop in 2020 had not gone away.

“When there is economic contraction, which is still happening today, businesses need to minimise costs to survive,” he told FMT.

“After they cut down on investments and inventory, labour costs are usually next, either through retrenchments or reduced pay or hours.”

He warned that this would create a dangerous cycle because reduced pay meant people had less to spend, causing businesses to experience constrained cashflow.

“Overlapping with this problem is another,” he said. “Under pressure to cut costs, in some sectors where it is possible to substitute labour, there is the shift to automation and machines.”

Casadio said these factors would persist even after the pandemic had become “less of a threat” and the pressure on salaries would remain if there were no long term strategies to address the issue.

Carmelo Ferlito, CEO of the Center for Market Education, said a drop in salaries was to be expected, given the economic contraction seen last year.

He told FMT even an improvement in average pay for 2021 might not be as positive a development as it might sound.

“In fact, it could mean things are worse than before. People who got pay cuts before may now lose their jobs for good. So their wages go to zero, but this won’t be reflected in the average. If it is mainly higher paid jobs that are preserved, while others are cut, it could cause the average to rise,” he said.

Ferlito said lower pay might be a good thing during an economic crisis, provided there was deflation leading to lower prices, but he noted that this was not the case at present.

“The lockdown has forced the government and Bank Negara to inject liquidity, creating dangerous inflation tendencies,” which, he said, had pushed the price of goods up at a time when people had less money to spend.