Inequality and Determinants of Earnings in Malaysia, 1984–1997*

Using three large nationally-representative Malaysian Household Income Surveys from 1984, 1989 and 1997, the present paper examines inequality and determinants of earnings. During the period 1984–1997, Malaysia’s real per capita GDP increased by approximately 70 percent, the participation rates for both men and women went up among all age groups, and the average number of years of schooling increased by 1.2 years. There was a significant relative wage improvement among the bottom deciles. The rate of return to an additional year of schooling remained high (at 10 percent), despite the huge increase in the supply of the highly educated. The stable overall rate, however, masks an increased rate of return on women’s education, and a decreased rate for men. Wage discrimination against women amounts to 16–20 percent, and the bias has increased in 1997. The pro-Chinese earning ethnic bias is estimated at 31 percent.