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As the cost of living rises, is the minimum wage relevant?

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Workers are under tremendous economic pressure due to the escalating cost of living.

Wages earned, in real terms (real wages), are consistency eroded by a spike in the prices of basic necessities.

Common sense will suffice to calculate the impact of the escalating cost of living: a 10% increase in the cost of essential goods and services translates to a corresponding 10% reduction in disposal income.

Conversely, it would mean that the existing minimum wage of RM1,500 is very much undervalued, considering existing cost-of-living factors. Faced with such financial constraints, wage earners are lamenting that RM50 is akin to RM5!

Given the dire state of wage earners, we need to question whether the existing minimum wage structure is still appropriate.

Our reference ought to be a 2018 Bank Negara study, which recommended that we adopt a “living wage” concept of wage determination, as opposed to the “minimum wage” structure.

This study found that a single adult in Kuala Lumpur needs a living wage of RM2,700 a month. For a couple with no children, the living wage was pegged at RM4,500, and for a couple with two children, it was RM6,500.

This system of a living wage ought to be the benchmark in deliberations for a national living wage. But, needless to say, the employers’ class will fight tooth and nail any attempt to transform the grossly inadequate minimum wage system that is in place.

Some employers, who have a moral obligation to uplift the living wage of workers, have been holding successive governments to ransom with threats of closures and disinvestment so that they can remain in business. This is regardless of the reality that workers are paid a pittance and, as a result, stay entrapped in the low and middle-income wage bracket, ie the bottom 40% and middle 40% segments of society.

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Malaysia was once in the league of countries such as Singapore, South Korea and Taiwan. While these nations adopted proactive structural policies to embark on a path to high-income nation status, our country pandered to the demands of employers to suppress wages.

In that era, when the minimum wage concept was not even welcomed by the government, it allowed for an influx of migrant workers – in cahoots with employers – to suppress wages.

Without going into the polemics of the implementation of the minimum wage, we urgently need to migrate to a living wage model of wage administration as opposed to the obsolete minimum wage module.

While short-term measures to tackle problems such as the shortage of eggs are appropriate, the long-term solution lies in resolving the predicament of inadequate wages affecting low and middle-income wage earners.

A start may well be in rebranding the National Wages Consultative Council to a national living wage council with the jurisdiction to formulate a blueprint for the progressive implementation of a living wage.

K Veeriah is secretary of the Penang Division of the Malaysian Trades Union Congress (MTUC)

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.
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Phua Kai Lit
Phua Kai Lit
1 Jan 2023 7.29am

Push for UBI (Universal Basic Income) at a level which our nation can afford, and for conditional cash transfers. Meanwhile this should be coupled with stopping intake of low-skilled foreign workers, plus stepping up and accelerating automation, robotisation, use of AI (artificial intelligence) etc. High wages are not a problem with high productivity.