Welcome to your first economic crunch, Generation Y of Malaysia.

This generation, born between 1981 and 1995, did not feel the effects of past economic crises. In fact, they grew up in times of rapid economic growth.

Most of them were mere toddlers or not even born during the economic downturn of the mid-1980s. During the 1997/98 Asian financial crisis, most of them were still in school.

The 2008/09 global financial crisis did coincide with the entry of some of the older Gen Y into the workforce but Malaysia was largely unaffected by this crisis and recovery was swift.

But the last couple of years have seen Malaysia’s Gen Y stunned by global economic uncertainties and structural issues in the domestic economy.

They have come of age when wages are stagnating, the cost of living is rising and, worse still, a boom in real estate prices has locked many of them out of property ownership.

Here’s the thing. Malaysia is not in recession or even close to one, going by macro numbers. The economy is still growing, albeit at a slower pace of around 3.5% to 4%, and the official unemployment rate is manageable at below 4%.

So, why do the young feel increasingly burdened and disillusioned?

For an insight into how young Malaysians are faring, we decided to go beyond what macro data tells us. We went straight to the source.

The Edge partnered financial product comparison site iMoney Group to conduct a survey to gauge how young Malaysians are feeling and how they are coping in their daily lives.

There are two broad parts to the survey: sentiment and spending (see infographics on Pages 72 and 73). We will start with the sentiment part. In a nutshell, the feeling is bad.  

Almost a quarter of respondents say they feel worse off than their parents’ generation. Four out of five believe Malaysia is either in a recession or heading towards one.

All the 1,259 respondents in the 21 to 36 age bracket say they have postponed or cancelled a major financial decision in the last 12 months. Buying property and holidaying overseas top the list.

And retirement planning? They cannot even think about it right now because there are more pressing problems at hand.

Among the youth, there are definite concerns about property ownership and affordability.

According to our survey, only one in four (27.5%) of the younger Gen Y — aged 21 to 29 — owns property while over half (62.2%) of the older Gen Y — aged 30 to 36 — own their own place.

Those who have yet to buy property simply do not feel confident that they can make a purchase in the near future. Most of them hope to buy a place in 5 to 10 years’ time. About 10% of those aged 30 to 36 feel they may never afford a home.

Sunway University Business School Professor of Economics Dr Yeah Kim Leng says these sentiments are hardly surprising, given that Malaysia’s current property market is just easing off a recent peak.

“At the current high prices, people may feel it is beyond their reach but conditions can change. If there is an oversupply situation, there’s no need to rush to buy. Sometimes, the expectation that prices will continually rise fuels demand and pushes up the prices further.

“Parents are also propping up the property market to some extent. They are worried whether their children can afford to buy,” says Yeah.

Based on the survey, three-quarters of those looking for property say their budgets are below RM500,000.

This is hardly surprising and lends weight to the consensus that there is a serious mismatch between the supply of property and affordability.

If you think the sentiment part of the survey sounds bleak, brace yourself. The spending part of the survey has unearthed a frightening picture of the financial burden that the Gen Y live with.

We asked respondents to share estimates of how much they spend on basic items (food, petrol and bills), their discretionary spending as well as their debt.

iMoney analysed the spending numbers of Gen Y based on their monthly income: under RM1,500; RM1,501 to RM3,000; RM3,001 to RM7,000; RM7,001 to RM10,000; and RM10,001 and above.

It is no surprise that it is quite costly to live, especially in urban areas, these days. Those earning below RM3,000 a month spend RM1,056 to RM1,409 on food, petrol and bills. The basic cost of living amount is slightly higher for those in the middle-income bracket.

“The cost of living has a definite floor of about RM1,500 a month in urban areas. It’s really tight for those in the middle-income and below group. Often, just getting by, takes up more than 50% of their salaries and almost 90% for the lower-income ones,” says iMoney Group CEO and co-founder Lee Ching Wei.

And this is before adding the debt obligations. Most survey respondents have some form of debt repayment: mortgage, personal loan, car loan, student loan or credit card.

iMoney’s calculation of the debt-service ratio (DSR) based on the survey results found that most Gen Y are shouldering a heavy burden.

This is particularly acute for those earning less than RM3,000 — their average DSR is more than 90%.

For the middle-income earners, those who make between RM3,001 and RM9,999, the average DSR remains high at 47% to 74%. Only those who make more than RM10,000 seem to be able to maintain a “safe” DSR of about 30%.

But this is just fixed credit. If you pile on credit card debt, the burden gets heavier.

Credit card debt commitments as a percentage of monthly income can range from 43% to 83% of income for those earning between RM3,000 and RM7,000, the survey found.

“Poor money management tends to drive debt like credit cards and personal loans. A lot of people have a car loan, student loan and mortgage. But, generally, people are not managing their finances well as you can see from entertainment spending.

“Debt levels are obscenely high. Those earning less than RM10,000 have DSRs that are quite scary, according to our survey,” says Lee.

The question is, how much does one need to live a reasonably comfortable life in urban Malaysia?

Lee reckons that about RM7,000 a month should cover basic living expenses, ensure a reasonably good quality of life and have some left over for savings and investment.

“If your starting salary is low, your increments are not going to move forward with inflation. That’s why it’s so brutal, because every other cost has increased but your income is not going up,” says Lee.

Let’s take Adam, a Kuala Lumpur-based executive in his early thirties, who makes about RM6,500 a month. This may sound like a comfortable wage but after deducting taxes and EPF contribution, Adam takes home about RM5,800, which he tries to spend carefully to support himself and his family.

Like many in his generation, most of Adam’s pay cheque goes towards basic necessities like food, petrol, toll and bills. The rest goes towards car repayments and rent. He manages to save some money every month.

“When I break it down, it is ngam ngam. There is no room to buy property. We kind of missed the boat. If you had joined the workforce in 2007 and you had been prudent, you may have been able to buy something in 2009 or 2010. But if you had joined later, by 2012, property prices had gone up,” remarks Lee.

There are other surveys and research that also point to younger Malaysians feeling like they are unable to cope with the cost of living on their current salaries.

Meanwhile, youth unemployment is worrying — estimated at 10% compared with the national average of about 4%. The salaries of younger workers in Malaysia have grown at markedly lower rates in recent years, a recent academic paper found.

Research on inequality in Malaysia by Universiti Malaya’s Dr Lee Hwok Aun and Khazanah Research Institute’s Muhammed Abdul Khalid looked at EPF savings accounts by age brackets. They found a widening disparity in average EPF savings between young and middle-aged workers.

Based on their analysis, the ratio of average EPF savings of the 45 to 55-year-olds to the 16 to 25-year-olds swelled from 16.5 in 2000 to 20.8 in 2014. “This finding concurs with the commonly expressed concern about low wage growth for young workers,” Lee and Muhammed say in their paper.

Shen, 21, who is graduating next year, looks to her future with a lot of doubt. In this economy, she wonders if she can land a decent job.

“I hope the salary is okay lah. If not, it will be hard. Maybe I will go to Singapore. That’s what some of my friends are thinking of doing,” she says.

This sentiment is captured in GroupM Malaysia’s consumer survey, 3D Malaysia, which is conducted every year to gain insight into consumer attitudes, preferences and trends. More and more Gen Y say they will seek opportunities outside Malaysia, this survey found.

“Their overall positive outlook for Malaysia sentiment is down (-11% from 2014). They would like to work overseas as there are better and fairer opportunities (+16% from 2014). All this points to an alarming fact — Malaysia may be or already is on the verge of losing talent and a young workforce,” says GroupM Malaysia.

A young Malaysian working in Singapore feels the difference. “When I worked in KL, I made about RM4,000 a month. I lived at home and drove my parents’ car and every month there was still no money. In Singapore, I make under S$4,000. I pay my rent and I take the MRT every day and yet I can save money.”

How so? He gives the chicken rice analogy. “In Singapore, chicken rice is S$4 or S$4.50. How much is chicken rice in KL? RM7. How to save money like that?”

Sunway University Business School’s Yeah says the average wage across the nation is still showing a nominal 5% to 6% increase every year. But he cautions that the national average number masks the problems faced by the lower-income group.

“They may not earn enough to cover the rising cost of living, so they are very vulnerable, especially if they are taking on a lot of debt. That would be the most vulnerable group who will likely face more difficulties in the future, especially when interest rates rise, inflation rises and employment opportunities shrink,” he says.

Like many in the baby boomer category have come to acknowledge, Yeah notes that the younger generation are rather different in terms of their life priorities and preferences.

The truth is people have a choice when it comes to deciding on discretionary spending or putting money aside for savings or investment.

“Investment is defined as a postponement of current consumption for a larger benefit in the future. There is a need to educate on the merits of thrift and sound investment for a better quality of life in the future,” says Yeah.

Then perhaps, this generation needs to redefine the YOLO belief. You Only Live Once but that life is a long one.

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