Exploitation of undocumented workers contributes to rural poverty

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To tackle the under-employment of the rural population, we must find out why there are so many undocumented migrant workers depressing the wages of the bottom 40% of the population, says Jeyakumar Devaraj.

 I wish to respond to this Budget from the standpoint of the ordinary citizens of Sg Siput.

I carried out a small survey on the economic situation of the residents in the rural areas of Sungai Siput two months ago and managed to collect data pertaining to 130 families.

I found that 45% of these families had a monthly household income of less than RM1,200, and another 40% between RM1,200 and RM2,000. Only 15% of these families had monthly household incomes of more than RM2,000.

Tuan Speaker, RM1,200 isn’t quite enough to meet all the expenses of a family with two or three children. Definitely not sufficient to send one’s children for tuition. Even the bus fare to regular school and the settling of utility bills would be a problem. I would consider all the families earning less than RM1,200 poor.

That is why I was amazed to hear our prime minister declare during his Budget speech that we had practically eradicated poverty in Malaysia. The member from Pekan claimed that our poverty rate in 2014 was only 0.6%! This really flies in the face of reality.

Appears that Pekan has himself become the victim of the government’s propaganda! Our government has set the poverty line at RM830 for a family with three children in Semenanjung Malaysia. This would mean that a family with household income of RM900 would not be considered poor. But definitely even RM1,200 isn’t enough to meet the basic needs of a family with three children.

I would think that setting the poverty line at a monthly household income of RM1,500 for rural families and RM2,500 for urban families would be much more realistic. If that was done, then the rate of poverty would be about 25% of Malaysian families.

Let’s now look into the causes of the poverty I observed in my constituency. About 20% of the men whom I surveyed received wages that were lower than the mandatory minimum wage of RM900 per month. How can this happen?

The answer is – the existence of 3.5m undocumented foreign workers in our nation. There are several thousand of them in Sungai Siput as well, and they are prepared to take jobs in estates, small farm and on the Felda schemes at wages that are below the minimum wage of RM900 per month. Malaysian citizens competing for these jobs have to accept similar rates if they wish to get employment.

Let me expand on this issue of undocumented workers a little. It is an important cause of the poverty among our B40 families.

Just last week, a group of 33 Sri Lankan workers came to see me in my service centre in Sungai Siput. They had come to work in a factory named Hume Cemboard in Sungai Siput four months earlier. As the management was not paying them as per the contract agreement they had signed earlier, they had brought the issue up with the management.

This resulted in their termination. By the time they came to see me, the management had cancelled their work permits with immigration and had taken out the COM or Check Out Memo, a sort of temporary immigration pass that enables them to stay in Malaysia till the date of their flight back to Sri Lanka. That had been fixed for four days from the day the met me.

They told me that they were desperate to stay. They had each spent more than Rs100,000, equivalent to RM6,000 as fees to the agents in order to come to Malaysia. Many of them had borrowed to settle the agent fees.

I told them that I was prepared to help. I advised that they come with me to the industrial relations office in Ipoh to lodge a formal complaint against their employer. With that in hand, I would take them to the immigration department to apply for a special pass. That would cost about RM100 each.

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They said they had not received their pay for the month.

I offered to advance the money for them first.

I explained to them the law isn’t particularly friendly to people in their straits, that the special pass did not give them the right to work for another employer while waiting for their case to be settled. But I promised that the PSM would stand by them and push to get the work permit so that they can work legally.

They agreed then.

But the next morning they called me to say that an agent had promised them work at an alternative employer and that he would be able to get them a work permit within two weeks.

I tried to explain to them that this is not possible, that they were going to fall into the hands of unscrupulous labour contractors and end up as illegal undocumented workers. I suppose I wasn’t as convincing as that agent.

About a third of them decided to go with that agent and they ran away from their hostel that day, augmenting the statistics of undocumented workers in our country. The remaining workers decided to cut their losses and go home.

This is the cause of the undocumented workers in Malaysia, Tuan Speaker. Most of them come through proper channels. But because of ill treatment or noncompliance with some terms of their contract, they end up in a conflict with their employers.

It is an uneven conflict as their avenues to argue their case are limited. As many are unprepared to go back to their home countries as they have debts there, they have no recourse but to become undocumented workers.

The PSM and I are sometimes accused by ‘netizens’ of being ‘soft’ on foreigners. Some even have advised me to resign as an MP and go into an NGO working with migrant workers. It is clear that these people are not thinking deeply enough.

The fact is, the presence of the 3.5m undocumented foreign workers is seriously affecting the wellbeing of the bottom 40% of our population. Their presence curtails job opportunities for our B40 and also drives down the wage floor.

The scope for Malaysian workers to negotiate better terms with employers is also severely circumscribed by the presence of a huge number of desperate foreign workers. It cannot be denied that the fates of the undocumented migrant workers and our B40 are linked.

So what can be done to contain the problem? Well, first, one has to acknowledge the problem. Unfortunately, there is no indication at all in the PM’s Budget speech that he is cognisant of this problem.

There are two things that we have to do:

1. We have to make it possible for foreign workers to take their grievances with their employers to the Labour Court or to the industrial relations department so that these can be dealt with.

Employers often play dirty and cancel the work permits of the workers they are in conflict with.

At present, the immigration department makes it very difficult to obtain the special pass. They insist on seeing the date for the industrial relations or labour case before they issue the special pass.

The Industrial Relations Court date is only fixed after a process involving “conciliation talks”, and if this fails, referral to the minister of human resources for clearance to refer to the Industrial Relations Court – a process that can take months.

The immigration department should issue a special pass on submission of a letter from the industrial relations or labour department that the worker has lodged a formal complaint against the employer.

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At present, the special pass states clearly that the worker cannot work, though he can stay in the country. Isn’t this ridiculous? The sacked worker has to move out of the workers’ hostel and find accommodation. He has to eat. How can he do this without finding another job? Isn’t the system encouraging him to stay on illegally?

The special pass issued to the foreign worker should allow him to look for employment with another employer. And when he does find another employer, the immigration department should issue a temporary work permit to him/her as expeditiously as possible.

If foreign workers are granted the right to redress, then the numbers among them who transition into undocumented workers would decrease quite markedly.

2. We should impose heavier punishment on the employers who take on undocumented foreign workers.

Tuan Speaker, we now have 3.5m undocumented foreign workers. It is obvious that they are not just sitting around shaking legs. Neither are they surviving on charity from the Malaysian public. They are working in thousands upon thousands of businesses and farms which find them a useful source of cheaper labour.

We do have laws, Tuan Speaker. Section 55(B) states in subsection (3) that any employer with more than five foreign workers in his firm should be punished with a mandatory jail sentence of at least six months. Have you heard of even a case of this happening? 3.5m undocumented workers, but not even one employer convicted under 55(B)(3).

What we do is we come down hard on the foreign worker. They get remanded. They get jailed, undergo whipping and then, after completion of their jail sentence, get deported.

Their employer in the meantime employs another undocumented worker.

We need tougher action on the employers, Tuan Speaker.

Let me take you back to my Sungai Siput survey.

25% of the men surveyed were smallholders. Their low income is due to two factors:

  • The first is, the low price of rubber.
  • The second is, the size of their smallholdings: 89% were working on plots smaller than three acres. A tapper usually taps a rubber tree every other day. Three acres can be tapped in a day. This means most rubber smallholders in Sungai Siput only work three days a week.

Another 15% of the men in the kampungs of Sungai Siput cited “kerja kampong” (informal, contract work in the rural area) as their main source of income. They too only worked two to four each week.

The member from Pekan stated that in 2014, the unemployment rate in Malaysia was only 2.9%. However, in the hinterland of Sungai Siput, about 40% of the men work only three to four days a week. They need extra sources of income, but are unable to find work.

This may be difficult to explain at first. There are literally thousands of foreigners working in the estates and factories in and around Sg Siput. But I would caution you to avoid making the mistake of blaming the under-employment of the kampong population on laziness on their part.

The truth is, employers much prefer to employ foreign labour. Of course, they have to pretend that they are looking for local workers, but they find it far more profitable to employ foreigners.

Let me explain this a little more.

One of the men I interviewed in my survey, a 35-year-old, told me he had been working in the Isolite factory in Ipoh prior to his current occupation of “kerja kampung”. He was employed by a labour contractor who supplied some 50 workers to Isolite. He was paid RM900 as basic wage and offered four hours overtime every day, six days a week.

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The problem with this arrangement was that the labour contractor was calculating overtime on the basis of a 1.0 ratio. According to the Employment Act, the overtime rate is 1.5 times the normal wage rate.

In this case, RM900 divided by 26 (days) and then by 8(hours) gives you RM4.33 as the hourly rate for normal work. Overtime should be 1.5 times that, ie RM 6.49. However, the labour contractor was ony giving his workers RM4.33 for the overtime as well.

When this worker brought this up with the labour contractor, he was told quite rudely that if he wasn’t happy he could leave. No one was forcing him to work there; the boss had enough foreign workers who were willing and happy to work, etc. From then on, the boss stopped giving him overtime work. After a few weeks of that cold shoulder treatment, the worker stopped work.

There is another reason why foreign workers are more economical for the bosses. The employer does not have to pay EPF contribution for them.

The employers has to make a contribution of 13% of the worker’s pay to EPF monthly for all Malaysian workers. This works out to RM117 per month per Malaysian worker. It is a mandatory contribution.

A levy has to be paid for each foreign worker. In many cases, a sum of about RM100 is deducted from the foreign worker’s salary for the purposes of paying the levy.

The existing system discourages bosses from employing too many Malaysians. Foreigners are much more economical. They do not complain when paid overtime at the basic rates. One does not have to fork out another 13% to pay their EPF. If any labour dispute erupts, it can be easily dealt with by cutting their work permits and shipping them back to their home country.

If we wish to address the under-employment of the rural population, we have to deal with this issue. In addition to strengthening the bargaining power of foreign workers and creating better avenues of redress for unfair treatment, we should also legislate that the levy for foreign workers cannot be cut from their pay but must be paid by the bosses. We should work to ensure that there aren’t any economic advantages accruing from employing foreign labour.

All this can be achieved if there is political will. Why hasn’t it been done so far?

Let’s take a look at who benefits from the present situation. We know that the foreign workers get bullied, are paid poorly and are stressed out. We also know now that our B40 also are disadvantaged by the current set up.

Those who gain are the bosses who get cheap and easily bullied labour, the agents and labour contractors who receive huge commissions for the provision of this cheap labour, and quite possibly (allegedly) senior government officials in the immigration department and in the police.

Most of these beneficiaries would belong to the T10 or the richest 10% of our population. Is this why the government turns a blind eye?

Yes, Tuan Speaker, the 2016 Budget does have some ‘goodies’ for the B40.

  • The minimum wage has been raised to RM1,000
  • The rubber price support scheme kicks in at a slightly higher price
  • The Brim amount has been raised a bit
  • Several more medicines have been zero-rated.

But all of these do not undo the economic damage inflicted on our B40 population by the labour situation in our country where the presence of 5.5m foreign workers out of which 3.5m are undocumented has denied our B40 employment opportunities and has kept their wages below the official minimum wage level.

None of this is addressed in the 2016 Budget, Tuan Speaker. As such, I am not able to support this Budget.

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