Rani Rasiah takes up the theme by looking at the hypocrisy of the ‘people first’ slogan in a system which squeezes low-income workers on all fronts. Low wages without proper retrenchment compensation only results in poverty, she asserts.
The one major crime Alice committed in her 23 years was to buy a house. Five years later now, she is not only in almost certain danger of losing the house, but she is also heavily laden with toxic debts.
In 2003, Alice, a factory worker with an overtime-boosted income of RM800 per month, and her mother, a cleaner earning a monthly wage of RM500, decided to buy a low-cost house near Ipoh. The low-cost house which cost RM38,000 when it was built many years ago had over the years bloated to a cost of RM75,000, a mind-boggling sum for people in that income category.
The monthly instalment was RM500 and both mother and daughter felt they could cope by scrimping on basics and with some help from a brother who lived together with them. It may seem like a scary decision for some of us, but it is not uncommon for poorer people to make decisions that seem impulsive and reckless.
The commercial bank they approached was delighted to get a customer and eagerly signed them on. There was no armed debt collection or recovery officers visible; the jargon in fine print was glossed over and went over the heads of the poor sub-prime borrowers.
Then came the horror. The scandalous subprime crisis brought the US economy to its knees, and wreaked recession on the rest of the globalised economies of the world. Back home, the fragile financial set up of the Alice family fell like ninepins.
In early 2009, Alice’s brother was retrenched. Her own income dropped to her basic wage of RM500. Towards the end of the year, her mother fell at the workplace, injuring her arm, effectively laying her off from work for good. The monthly family income thus stood at RM500.
They began defaulting on the housing loan instalment. After several months, their arrears with the bank rose to RM7,000. The bank rapidly found its tentacles and began legal proceedings to recover the RM75,000 loan. It also applied to the High Court to foreclose the property.
Alice and her mother appealed against the foreclosure, pleading with the bank to cut down the instalment amount. They had made the house a home, a roof over their heads, and even though it was not theirs yet, they couldn’t think of letting it go.
The bank agreed to negotiate but on their terms – Alice and her mother had to pay up the RM7,000 arrears first. Even though Alice’s mother was due to retire in six months, thus making available her EPF savings to settle the arrears, the bank insisted on upfront payment before renegotiating the loan.
In desperation they turned to informal moneylenders, initially borrowing RM3,000 at 10 per cent interest. The interest payment alone for this loan was RM300 per month.
Both mother and daughter then were instructed by the bank to withdraw from their second accounts in the EPF and the balance that remained of the arrears was to be settled with the mother’s EPF savings once she became 55.
For now, they have managed to save the house, but have been driven deeper into debt. They have to pay out more each month towards the housing loan instalment and interest on the RM3,000 loan. These payments have practically wiped out the mother’s old age savings. Another wave of recession and the house will fall, and everything the family has put into this investment will be washed away.
Why the poor should not buy a house
The low income group should take every liberty to dream of owning a house but to venture out and actually buy one could result in severe difficulties for themselves. From a situation of somewhat bearable hardship minus monthly loan payments and additional debts, a defaulting family slides into the depths of greater poverty as they get stuck in debt traps and are hounded by the debt collection agencies of both legal and illegal credit sources.
Why shouldn’t poor families think of purchasing a house?
First, for a low-income family to aspire to buy a house, they have to earn enough for daily sustenance and in addition be able to spare enough to service the monthly housing loan instalments. This condition doesn’t exist in Malaysia as the government pursues a low-wage policy. But the bulk of workers manage to boost their RM300–600 basic monthly incomes to RM1, 000 or more a month by working overtime in a 12-hour day routine. This is the dangerous high that gives workers the illusion that they are earning enough to buy a house.
Second condition: The worker must earn a guaranteed amount of money every month to repay the instalments over a period of three decades This condition implies a minimum wage and job security, the first of which doesn’t exist, and the second, a condition that has almost ceased to exist given the worsening labour situation in which Malaysian workers have become easily dispensable in the presence of three million migrant workers.
Third condition: Low-cost house prices must be as low as wage levels, rising only in tandem with wages to ensure there are no defaults in the monthly repayments. The reality, however, is that while low-cost house prices have spiked from RM25,000 in 1982 to RM42,000 in 1998 and are now expected to soar to RM60,000 as currently demanded by the housing industry, wages have remained stagnant. The other reality is that there are no government schemes to provide universal, subsidised and adequate council-type housing to compensate for low wages. In fact, what’s often the case is the ruthless demolition of the only homes belonging to the poor by the government, which justifies its actions by calling them illegal squatters.
Fourth condition: As the fortunes of the poor wax and wane, buffeted by the irrationality of capitalism, the government has to consciously put into place mechanisms to help house-buyers keep their homes. One such mechanism is a low-interest easy loan scheme without forbidding conditions that they can borrow from when there is a drastic drop in income during the cyclical capitalist crises every five to ten years. But nothing of this sort exists to help workers whose income sees a drop. The hapless workers are left at the mercy of loan sharks, who only drag them deeper into indebtedness and poverty. Just compare this situation to that of the companies which were bailed out to the tune of five billion ringgit EPF money through Valuecap at the start of the latest crisis.
System that squeezes the worker on all fronts
The unenviable lot of the average Malaysian worker today is the direct result of the kind of economic model that is being pursued in the country that squeezes the working class on all fronts. With Malaysia’s focus on attracting foreign investment, feverish measures are being put into place to make and keep the country internationally competitive. Apart from the removal of trade and investment barriers, measures include keeping costs down, which means low wages for workers, all to enhance the ease of doing business.
But if it is imperative that workers have to sacrifice by taking home low wages, is it not imperative that the government takes adequate measures to ensure that working-class families are able to fulfil their basic needs? Is it not the responsibility of the government to compensate for the low wages by ensuring that workers are able to adequately feed, clothe and house their families? Furthermore, shouldn’t the government ensure a level playing field in health care and education for low income families?
As is obvious, this is not the case. While maintaining low wages, government policies since the 1980s have resulted in the dismantling of the government’s provision of basic amenities, health care and education to accommodate the privatisation of these services. This has led to higher costs, and in the case of health care, deterioration of government hospitals which are frequented by the poor. The now thriving business of private education too seems to offer endless opportunities, but in reality, saddles the children of low income families with a future of indebtedness, and credentials of dubious quality. Add to this the imminent implementation of the regressive Goods and Services Tax, and you get a clear picture of where the working class stands in the order of things.
Meanwhile FDI or not, the business and political elite remain a privileged class, living it up and rewarding themselves handsomely.
In a resource-rich country like ours, there is no reason why there should be poverty and deprivation for a large section of the population. A caring government which thinks there is no other way for the country to survive but to compete for foreign investment, can set aside part of its budget to ease the lives of the workers it allows to be exploited. We must not forget that as much as 30 per cent of the budget is already being squandered away on leakages. That money can be put to good use. The government can subsidise essential food items, school bus fares and housing, for example.
It is not enough that the government sets aside aid for the hardcore poor. It must recognise that 60 per cent of working class families suffer hardship in making ends meet because of low wages. It must take measures to compensate them.
What is needed is not so much the means as the political will to make genuine improvements to the lives of people, and certainly not more of the ‘people first’ hypocrisy.
Rani Rasiah, an Aliran member, is coordinator of the Oppressed People’s Network (Jerit)
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