Minimum wage: MEF needs to go beyond sector-based thinking

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A workers' protest in Malaysia

How did the MEF come to the conclusion that foreign workers would benefit more than Malaysian workers due to a hike in the minimum wage, wonders Ronald Benajamin.

For a nation to grow through equitable prosperity, there is always the need for sacrifice from all quarters, what more from those who benefited the most from the nation’s wealth in the past.

It requires an attitude that goes beyond sector-based thinking. Such an attitude seems to be lacking on the part of the Malaysian Employers Federation (MEF). The MEF has reportedly been caught off guard by the announcement in Budget 2018 that the minimum wage would be increased to RM1,100 from RM1, 050.

Its executive director, Shamsuddin Bardan, said the move would only benefit the country’s estimated 1.8 million foreign workers. He said the government had announced and gazetted the minimum wage at RM1,050 following the recommendation of the National Wage Consultative Council (NWCC). “We did not expect further review during this period. This announcement of the new rate was unexpected and creates bad precedence, adding that it would erode investors’ confidence.”

Saying it was a flip-flop decision by Putrajaya, Shamsuddin added foreign workers would be laughing all the way to the money changer. He warned that the increase would lead to prices of goods and services rising.

Although I would agree the government should not have flip-flopped and should have got it right the first time, I beg to differ on his subsequent statement.

The question is, how did Shamsudin come to the conclusion that foreign workers would benefit more than Malaysian workers due to a hike in the minimum wage? Is it merely to do with the ringgit flow to foreign countries through repatriation?

The fact is, foreign workers work long hours without rest and some of them have no day off. Employers do not need to pay EPF and Socso for these foreign workers. Isn’t it justified that they should be paid fairly for their day-and-night contribution?

Think of those foreign workers who come in through certain agents who take up a substantive portion of these workers’ income and in turn pay them low salaries for 12 or more hours of work, with no overtime payment. Are these foreign workers mere cogs in the machines that should be used without appropriate compensation?

Secondly, the argument that foreign workers would benefit most from the increase in the minimum wage does not hold water in the long-term context. There have been a general decrease in foreign workers in the country. By the end of August 2018 the number of foreign workers has fallen to 1.7 million or 12% of total employment.

This suggests that the bottom 40% of Malaysian households would benefit more as the Pakatan Harapan government rationalisation process of foreign workers takes place. Under this process, the authority to bring in foreign workers would come under the Ministry of Human Resources.

According to economic report 2019, a precursor to budget 2019 (The Star, 3 November 2018), a gradual hike in the minimum wage for Malaysian workers has a lower impact on the economy. It is projected that the minimum wage is expected to promote a shift in the workforce from low to semi-skilled and skilled workers that would lead to higher GDP in the long run.

So how could the increase in the minimum wage benefit foreign workers at the expense of Malaysian workers or how would it be detrimental to business?

In terms of a higher cost to consumers due to an increase in the minimum wages the MEF president seems to have a myopic view of efforts of the PH government to facilitate the use and development of artificial intelligence, digitalisation and hi-tech processes that would help increase productivity. As stated in Budget 2018, the government will set up a RM3bn industry digitisation transformation fund to encourage industries to use artificial intelligence. This would help increase efficiency and bring down the cost of production in the long run.

The high cost of consumer goods is not merely due to higher salaries. It has a business monopolistic dimension on how supply chains are structured in the economy besides the role of middle men in the distribution of services and goods. Just go to the wet market or grocery shops and ask those sellers why are prices of goods are high and you would get different perspectives which are not merely to do with high salaries. It would be good if the MEF president is able to rise above narrow-sector based thinking and come up with solutions with stakeholders on how to break up monopolies in the business chain as this would serve the common good.

So the MEF president’s argument seems to be shortsighted ie without looking at bigger picture. Malaysia needs to build the necessary foundation for a transition to a higher-value economy.

The maiden Budget by Pakatan Harapan intends to create a balance in this aspect but it would need a major change of attitude among certain employers especially those who keep holding to the old model ie that the increase in the minimum wage would increase production cost and ultimately be transferred to the consumers, resulting in a high cost of living.

Such a narrow doctrinal view has no place in progressive Malaysia. We need a change in attitude among employers so we can embrace the transition to a higher value economy that has a complex dynamics. It requires an attitude and behaviour that rises above sector-based thinking.

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