Wednesday, March 08, 2006

Price Increases - That's Life You Dummy!

Those greedy hawkers?

Here's something you won't read in the newspapers - Hawkers have a RIGHT to increase their prices!. No, I am not a hawker myself, neither are any of my family members hawkers (therefore ruling out any conflict of interest), but I say it because it's true!

Lately there's been such a hoohah over the increase in fuel price, and the alleged 'profiteering' by the traders and hawkers around Malaysia. Frankly, I find all this a tad bit silly and I believe that it stems mainly from people with no understanding whatsoever of the economic situation in Malaysia, and the world at large.

Here it is plain and simple, 'hawkers and traders will increase their prices in the face of rising living expenses'. To say that there is no basis for a price increase just because petroleum does not form one of the main components of say, a bowl of asam laksa is just plain misguided.


But..but..a bowl of mee sooo expensive nowadays oh!



Here's a hypothetical situation - Imagine that the cost of vehicle and house ownership in Malaysia suddenly doubled due to the meddling of an evil foreigner (think George Bush, George Soros, George Clooney bla bla bla). Such an event would definitely send our CPI through the roof, causing everyone to feel the pinch.

Imagine now that you are a hawker peddling char kuey teow by the streets of KL, and you are faced with the prospect of having to fork out an additional RM2,000 a month to pay for your house and car. What would you do? Why, you would raise the prices of your goods of course. It's only logical right? Now imagine someone coming to you and telling you that you have no reason to raise prices because char kuey teow is made from, well, kuey teow, tau geh and oil; and not from little bits of houses and automobiles. You would be forgiven for wanting to smack the person on the head with a piece of balled up kuey teow.



This very same situation applies to everyone everywhere, irregardless of your occupation. Whethe you're a manager or an executive, rising oil prices translate into increased living expenses; which in turn results in the desire for a larger raise, bonus etc. Face it, when you ask for a raise, you're basically increasing the price of your product (your time, resources, efforts etc). Despite the differing nature of the 2 products I'm talking about here (intellectual vs physical), parallels can and should be drawn.


It's a little thing called inflation



Some of my more mathematically inclined readers might do some basic arithmetic and come up with the conclusion that by raising the prices of their food stuff by say, 10%, hawkers are making more than enough to offset the higher price of fuel.

You would be correct to say that, but you're not looking at the whole picture. You have to add inflation into the equation. Malaysia's inflation rate nationwide is calculated to be around 4% give or take a few points. Mind you, that's Malaysia as a whole (including all those ulu kampung areas). If you zoomed down to KL and PJ, the inflation rate is much much higher. Studies have shown it to be anywhere between 6-8%!

With that in mind, it would be logical to surmise that hawkers should raise their prices by around 8% every year in order to break even. The thing is, most of them don't. Many hawkers (the ones i frequent at least) have peddled their wares at the same prices for 2 to even 3 years now! For a hawker who sells a bowl of mee at RM3.50, it basically means that he is underselling his product by at least 60 cents. So even if he were to increase the price by say, 30 cents, it would still be nowhere near the actual, inflation adjusted value of that very same bowl of mee he sold 3 years ago.

Corporate people expect to have pay increments of at least 10-15% a year, yet cry foul if other people such as hawkers, traders and business people aspire for the same thing. Instead of venting our fury at the alleged 'greed' of other people, shouldn't we in fact be working harder in order to ensure that our rate of pay increases trumps that of inflation?

14 Comments:

Blogger NickTay said...

Thats true, everybody has a right to make a living.

10:14 AM  
Blogger KY said...

you might want to check the inflation rate of your "some studies"

CIA world fact book put it at 2.9% for 2005 (est.)

link here: http://www.cia.gov/cia/publications/factbook/geos/my.html

If the inflation is at 8% like you mentioned. It only takes 9 years for prices to double. Think 9 years back, did things cost only half as much?

Cheers.

3:21 PM  
Blogger Bernard Yong said...

http://www.statistics.gov.my/english/frameset_cpi.php?file=cpidec05

Rated at 3% from January to December 2005, with certain key items registering up to a 3.9% increase.

http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_b43b3419-cb73c03a-1c672480-b0fdb592

In the link above, an article in The Edge says that inflation is forecasted to rise to 3.8% this year (second paragraph).

4:03 PM  
Blogger Bernard Yong said...

As for the issue with prices doubling every 9 years, that will only happen IF the inflation rate of 6-8% I mentioned was based on a 10-year average, which I never claimed.

10 years ago, I used to pay around RM2.50 for a packet of chicken rice, nowadays it cost around RM4.50, an increase of 80%, which translates to an average inflation rate of 6%. Of course, that is but one product in a large basket of goods used to generate the index.

Depending on the basket of products you benchmark in your index, the rates may vary (especially from study to study).

I will try to find a link to the article which I read, which estimated that the real inflation rate for the KL region is somewhere around 6-8%.

Food for thought, the inflation rate for the whole of Malaysia in 1998 was 5.8%.

http://www.expressindia.com/fe/daily/19980818/23055184.html

Seeing how prices in KL tend to rise more rapidly than in the outlying areas, an inflation rate exceeding 6% for KL is not too far fetched.

4:18 PM  
Blogger Ph3RoXi4 said...

sheesh... enough wit those numbers man... u guys should start a lil financial review meeting or something... well, as for me, final conclusion - m'sia aint cheap to live in man!

remember when nst had a front page on m'sia being the 97th place or something for being one of the cheapest places to live in? i think they are so, so damn mistaken...

earning power with degree as an example :

UK - 2000 pounds
M'sia - 1800 ringgit

price of MR2 : (ky! =p)

UK - 3000 pounds (less actually!)
M'sia - 42,000 ringgit!

well, i think i've made my point!

=)

4:53 PM  
Blogger ::Lord Apprentice:: said...

ky: never trust the CIA

bernard: how much added chicken and pork do you add to you chicken rice lah? RM4.50? wah weeee... u phatty


Ph3RoXi4: amen dude...our earning power kinda sux. then again, there's money to be made everywhere in m'sia. :)

5:22 PM  
Blogger Bernard Yong said...

lord apprentice : Now now, don't u go start talking about how you want to make money by prostituting yourself to gay, old men again...tsk tsk.

5:45 PM  
Blogger ::Lord Apprentice:: said...

you're my inspiration dude. heheh

1:50 PM  
Blogger Ph3RoXi4 said...

hey, how long do u wanna stay "dirrrrrty" man, haha.

can u guys at least have a LITTLE aim to go straight? =)

btw, did u guys see the pic in the star i think, of the officer dude pointing for a hawker stall lady to remove a tag indicating a price increase her food? haha... a makeshift paper with the number 4 covering a 3. =D

go get 'em bernie!!! =p

our newly unofficial appointed "VOICE" for our beloved hawker stall "lou sai's"!!!

oh! i thought i just heard a soft cry somewhere! what?! cha? kuei? teow?

hhmmmmm... =)

11:06 PM  
Blogger Bernard Yong said...

Ehhh, I am straight as an arrow. It is only Nimal which likes things stuffed up his bung-hole...hahahah

I didn't see the pic in The Star, but I'll look it up. Some poor, lil old lady food seller needs my help!

9:58 AM  
Blogger Ph3RoXi4 said...

yay! i'm baaaaaaack! didnt miss the weather here though cos it was greaaaaaat in istanbul! yeah yeah i know i'm boasting... =p hope u guys didnt miss me thaaaaaat much! =p not cheap there though... a kebab off the streets is about 2 USD! talk bout living cost... but i guess if u earn there it'll be alright. whatever.

btw, bernerd, why so touchy n defensive? =p got something going on izzit... hehehe... u dont have to hide it, we wont act shocked, cos we WONT be! haHAhaHAha... =)

3:51 PM  
Blogger Bernard Yong said...

pheroxia : show off...hahah. Took any pics of istanbul or not?

And btw, its BernArd, there is NO 'E'!!! @%$#$@...hahah. Plus, I have nothing to hide. I am as open as a day-old flower...ermmmm.

9:14 AM  
Blogger Ph3RoXi4 said...

okok, berNERD... =p

day-old flower?!!??! hahahahha...

someone pleaaaaase get me some handcuffs to hold my hands from slapping myself silly in hopes of stopping me from laughing my lungs out... =p

4:01 PM  
Blogger Bernard Yong said...

Stop pretending, I know you have a couple of hand-cuffs stashed somewhere which you use to cuff poor ol' Eugene during your raunchy activities... hahahah

4:21 PM  

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