NOV 28 ― Although the minimum wage law is scheduled to take effect in January 2013, the Barisan Nasional government does not seem to be particularly committed to re-imagine the Malaysian economy through wage policy reform. Efforts to smoothen the transition for small and middle industries are seriously lacking too.
Minimum wage is meant to tackle several long-standing structural
issues of the economy at once. As the United States and Europe struggle
to stay afloat economically, Asia can no longer remain as an exporter,
we need to grow our domestic/Asian markets; a higher income among locals
will help generate a more vibrant domestic market which in turn will
generate more jobs.
Also, with minimum wage, companies and industries will likely to rely
less on cheap labour but invest in longer term potentials, capabilities
and hence productivity of the workforce.
This is a virtuous cycle that will check dependence on unskilled
foreign workers and brain drain at once. Skilled citizens who work in
foreign countries are likely to consider resettling back to their
homeland if the wage difference between their home and host countries is
Gangnum-style policy making
Essentially, BN lacks a coherent new economic framework.
I frankly do not think that the BN government and its leaders had any
idea why there was a need to introduce a minimum wage. Like many other
policies, it was done just to respond to the opposition’s agenda.
While BN is currently the longest serving elected government in the
world that is still in office and wanted to be re-elected for policy
continuity, most policies were made in what I call “Gangnam style
manner” ― on the horseback, basing on just back-of-envelope calculation.
Consultants were brought in later to make ad hoc decisions
So we hear hilarious claims by MCA president Dr Chua Soi Lek and his
son, Chua Tee Yong, that minimum wage leads to national bankruptcy and
that paying foreign workers minimum wage will amount to more currency
outflow through remittance.
By the way, Dr Chua Soi Lek also claimed that Pakatan Rakyat’s policy
to renegotiate toll rates with concessionaires and to end North-South
Expressway toll collection would result in tens of thousands of toll
workers losing their employment.
To Pakatan Rakyat, removing many monopolies and rent seekers in the
economy will help generate higher disposable income for ordinary
Malaysians. To Dr Chua and BN, any change to the crony economy is a bad
Why minimum wage?
Before we venture into the rationales for a minimum wage in Malaysia, let us first understand the regional economic dynamics.
On November 21, 2012, newly elected Jakarta Governor Joko Widodo
raised Jakarta’s monthly minimum wage by 44 per cent to Rp 2.2 million
On the subsequent day, West Java increased the minimum wage levels of
its 26 districts and cities by an average of 25 per cent; one of which,
Bekasi, is at Rp 2.1 million, just slightly below Jakarta’s level. More
regions are likely to match Jakarta’s level close enough to prevent
their own workers from flocking to Jakarta.
The immediate response from the Indonesian stock market was huge
appreciation of share prices for companies producing consumer goods, as
higher wages mean higher domestic consumption. Of course some employers
were not happy with the rise but many can immediately spot the benefit
of a bigger domestic market.
In the Eastern seaboard of China, such as Shenzhen, minimum wage is
at RMB1,500 (RM735) while new daily minimum wage level in Thailand is at
300 baht a day (RM30, almost equal to Malaysia’s minimum wage).
What do these figures mean for Malaysia? The Barisan Nasional
government sets its minimum wage at RM900 for Peninsular Malaysia and
RM800 for Sabah and Sarawak while Pakatan Rakyat proposed a RM1,100
package with transitional funds to facilitate vulnerable industries to
The challenge for Malaysia in the years to come is whether there will
still be abundance of supply of foreign labour from neighbouring
countries like Indonesia and Burma where their wages are close enough to
that of Malaysia’s.
The Malaysian economy will soon to be at a standstill if supply of
cheap labour dries while Malaysia’s skilled labour and professionals
look elsewhere for greener pastures due to low pay and lack of upward
mobility in general in Malaysia.
Minimum wage is but one of the many reforms Malaysia that needs to undertake to move to the next level.
A new agenda for SMIs/SMEs
Many of the reforms like helping labour-intensive industries to
become skill and knowledge intensive should have happened twenty years
ago in 1992 when Malaysia first reached middle income nation status. But
because for every foreign worker brought into this country, someone
close to the establishment makes a cut through licensing and other sorts
of payment, there is a huge lobby to resist any change.
While minimum wage has very little impact on most industries
especially those with very high value added, it is also clear that the
implementation of minimum wage, even at RM700 – not to mention higher
rate, causes problem for small and medium industries in low-end
To help them is not to stop implementing minimum wage but to support
them with financing as well as skill development so that they can be
less labour-intensive. What is lacking in BN’s minimum wage policy is a
facilitation fund as proposed by Pakatan Rakyat to assist these affected
Beyond minimum wage, Malaysia’s small and medium businesses face
other challenges. Corruption, red tape and dominance of GLCs in the
economy make it very difficult for the “small guys” to operate in. A
form of “tax terrorism” in heightened tax collection and frequent tax
raids on SMIs/SMEs have caused fear among small businesses.
What Malaysia needs is a rethinking of our wage policies in a new
global and regional environment. Anything short of that won’t take us
very far. ― The Rocket
* Liew Chin Tong is the member of parliament for Bukit Bendera
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