The argument for minimum wage in Malaysia

The case for Malaysia to have minimum wage, now

Prelude – A Global perspective

Imagine this scenario. Australians are laughing at us Malaysians and those who work in Malaysia due to low wages. This is not a joke. It is real. The absence of minimum wage is one of the reasons why others ridicule our salary system in Malaysia. We are chastised even among Malaysians who work overseas. Yes, Australia is a much more developed country compared to Malaysia. But is this an excuse for not implementing minimum wage? Look at the interesting chart “Gapminder World Map 2010”. In the 70s and 80s, we used to be ahead of or on par with South Korea, Hong Kong and Taiwan in terms of economic dynamism. But where are we now? We are even eclipsed and beaten by countries such as Argentina, Poland, Croatia, Czech Republic, Slovakia and Slovenia in terms of GDP and life expectancy. Data and common sense prevail that the higher income countries will have a better life expectancy. And what do these nations have in common that Malaysia does not have yet? Yes, all of them have a minimum wage system and I believe if Malaysia does not address this issue soon, we will be left in the middle-income trap and not be able to achieve Vision 2020 as envisioned by former Malaysian Prime Minister, Tun Dr Mahathir Mohamad.

The case for minimum wage – A Local Perspective

There have been growing concerns over the implementation of minimum wage in Malaysia. The Human Resources Ministry has decided to “grab the bull by its horns” and came out with proposals to engage stakeholders in coming up with an appropriate action which can benefit the working class, particularly the middle and low income groups. The Malaysian Trade Union Congress (MTUC) has been lobbying hard for a minimum wage for the past 12 years or so. Federal opposition parties like in Malaysia like DAP and PKR are campaigning for a minimum wage as well. Even recently, the Federal Government parties like UMNO and MCA are beginning to warm up to the idea of a minimum wage system. It appears that only a handful of organizations are against minimum wage. The Malaysian Employers Federation (MEF), true to its objectives in protecting profits made by employers and their companies, and as such, will not resort to minimum wage as they claimed will affect productivity and raise the cost of doing business. The Institute for Democracy and Economic Affairs (IDEAS) have argued that in a free market, government should not interfere in manipulating salary schemes and the introduction of minimum wage will further push poor workers into worsening poverty.

Pros and cons – but what are the facts?

As they say, the truth is ugly and truth hurts for that matter. According to the New Economic Model (NEM) report released by the National Economic Advisory Council (NEAC), it is a shocking fact that 70% of our workforce population is earning at most RM 1,500 per month. And 70% of them are mostly high school grads with only SPM qualification. Opponents of minimum wage are arguing that increasing wages will only lead to inflation and the best way to increase wages is by investing on education and skills learning. But do we have the time? It may be unfortunate that we should have done that a long time ago, but we are at the crucial crossroads now. We have only 10 more years to go before we are scheduled and expected to reach a high-income nation. The low and even middle-income groups are finding it hard to make ends meet. Whereas the elites and employers are laughing happily all the way to the bank, the socioeconomic gap between the haves and the haves-not is widening and this is not a healthy development for a multiracial country like Malaysia.

Concrete and constructive reasons for a minimum wage

1. Wages in Malaysia have been stagnant for the past few years and this is just not acceptable. Cost of living has risen tremendously and the purchasing power of Malaysians is getting weaker day by day. With the recent subsidy rationalization programme, this will push up the cost of living even more. So as a “quick fix”, a minimum wage can at least cushion the impact of the rising cost of living among the working poor. Whether or not this so-called quick fix will have consequences cannot justify the need for an immediate solution to address the socioeconomic imbalances. When people have no money, they get hungry. And when they get hungry, they become angry.

2. The Prime Minister, Datuk Seri Najib Razak has announced time and again that we need to achieve Vision 2020 with the support of key pillars such as the 1Malaysia concept, the Government Transformation Programme (GTP), the Economic Transformation Programme (ETP), the 10^th and 11^th Malaysia Plan. The main philosophy of 1Malaysia is People First, Performance Now. Note the catchphrase people first and not employers first. Obviously employers are also people but what we need to stress here is the working poor who unfortunately account for 40% of the population, out of which 34% live below the poverty line of RM 700 per month. This is a serious and hard pressing issue. Malaysia – indeed we have a problem! There is no way we can achieve what the PM espoused for until and unless this segment of the population is being taken care of.

3. Coming back to the NEM that states we should be a high-income, inclusive and sustainable economy, it is acknowledged that a high-income nation will remain only a pipe dream if our workers continue to earn low wages. We cannot be inclusive if our working poor are unable to earn a decent living. How sustainable can we be if the gap between the high income and low wage groups persists and keeps on widening? It is simply unsustainable and sooner or later, the working poor population will be bursting at the seams. This would reflect a bad effort on part of economic mismanagement by the government.

4. Needless to say, having a minimum wage will push salary scales and subsequent adjustments to a higher rate. This can help address the brain drain phenomenon and prevent Malaysian talents from leaving the country. As of now, close to 350,000 Malaysians are working in Singapore due to low wages in Malaysia. The amount of Malaysians working abroad is huge. What about Malaysian professionals who work in North America, Europe, East Asia and Oceania?

Conclusion

We should face the facts and look where we are now. See where is Malaysia again in the map and we can do better. We are a resource-enriched nation. We do not have catastrophic natural disasters of any kind. We are blessed with political stability over the years. We owe it to our people to provide them a better life for generations to come. We need a minimum wage, or at least a fairer wage system badly. The minimum wage policy should be seen as an effective tool to break the vicious cycle of addiction to low cost of living, cheap foreign labour and continuous dependence on low wage system in order to achieve high-income nation status. The government must take bold, decisive aggressive and compulsory methods to elevate Malaysia to greater heights. It is now or never. In 10 years from now, I hope Malaysia will be among the top right corner group of countries in the “Gapminder World Map 2020” and that Australians will never laugh at us anymore for having low wages. Malaysia Boleh!