It is time for employers to think out of the box, says Jeyakumar Devaraj.
A news portal recently carried an article quoting employer association leaders bemoaning the fact that public holidays cut into their profits.
According to Malaysian Employers Federation executive director Shamsuddin Bardan, 17 public holidays declared in Malaysia is too many as it amounts to a productivity loss of RM1bn for each public holiday.
But surely Shamsuddin and his friends know it is not 17 but only 11? Article 60D in the Employment Act requires employers to give a total of 11 public holidays per year; five of these are fixed.
Apart from 11 public holidays, workers are entitled to eight days’ annual leave if they have less than two years’ service and 16 days if they have more than five years’ service.
Our workers are human beings and not robots. They have family obligations. A total of 27 days off from work per year for all family, social and religious obligations isn’t too much to grant, is it?
In any case, Malaysia workers work 48 hours per week before overtime kicks in. Workers in advanced countries work far shorter hours – the average working week in Germany is 38 hours while it is 35 hours in France now.
Due to low wages, most workers will choose to work on a public holiday to get double pay. Already, many workers now work on their weekly days off for extra income especially when they have expected additional expenses at the end of the month for festivals, getting kids to school and weddings.
When workers willingly sacrifice their days off and public holidays to earn extra cash, employers are not complaining, are they?
In fact, unlike employers, workers don’t have money to go for holidays. Their days off actually incur extra cost for them as they might have to take their children out for leisure.
If they do go out, it will be a local trip. Unlike employers who can afford overseas holidays and spend money overseas, the working class, on their days off, choose to spend their money domestically, thus helping local small businesses to grow. Thus public holidays actually spur the local economy.
The Socialist Party of Malaysia (PSM) is not anti-business – but we deplore fat cat businesses that only care about maximising their profits.
We know that private businesses provide employment to about 10 million Malaysians and generate about 70-75% of the county’s GDP. We need our businesses to do well so that they can generate more capital for further investment while also paying their workers decent wages and the government a fair tax.
But what we find perplexing is that Malaysian businesses which are so sensitive to the “loss” of RM1bn from one public holiday seem impervious that they are being short-changed daily by the global chains they are producing for. On average, our business people are selling products at a sixth to a quarter of the price of an identical product produced by factories in the EU or the US.
The South East Asian model of industrialisation was to create export zones and invite factories from advanced countries to outsource to Asean, where they could benefit from lower wages.
Many of our local businesses are junior cogs in large global chains and are in a dependent position compared to the multinational company helming that particular chain. As a result, the Malaysian cog may actually be producing 70% of the value of the product but only receiving 25% of the total value generated by the global chain.
If the owner of the Malaysian cog asks for a bit more of the total value, the multinational uses the threat of shifting orders to the more compliant Vietnamese or Thai cog producing the same component.
So to keep his profits up, the Malaysian businessman has to squeeze his workers – keep wages down, push the government to bring even poorer workers from Nepal and try and reduce public holidays.
Malaysian business people are not the only ones befuddled on this point. Most government planners have been similarly befuddled by the Bretton Wood Institutions – World Bank and the IMF – as well as the World Trade Organization.
These institutions have brainwashed our business and political leaders to accept that our countries are poor because of low worker “productivity” (a dodgy concept based on circular reasoning) – and not because Asean companies are continually being bullied by the multinationals in the advanced countries.
Our employers need to wake up to the fact that:
- we are being grossly short-changed and
- there are definite steps that can be taken to retain a greater share of the wealth we produce in
It is not possible to outline in detail all the steps that could be taken, but we would suggest:
Study example of China
China also started by inviting factories from advanced countries to take advantage of low wages in China. But China had the foresight and the economies of scale to use the inflow of manufacturing capital to build an integrated industrial sector, which can now operate independently of the advanced countries.
We in Asean remain enclaves for the advanced countries. We will flounder if the multinationals pull out. Isn’t it time we start planning on developing Asean as an integrated manufacturing hub that is relatively more independent of the multinational companies from the US, the EU, Japan and now China?
When we can stand on our own feet, we would be less easy to bully. Of course, this cannot be done overnight, but the planning has to start if we want to be there 20 years from now.
Develop Asean consumer market
We have to accept that the golden goose – the affluent consumer market in the advanced countries – is ailing. It has been stricken by the outsourcing of well-paying jobs to China, Asean and elsewhere. Growth in consumer demand in the advanced countries will not recover to what it was in the 1950s–1970s.
So we in Asean need to raise our own aggregate demand – the population of Asean is now 650 million – to provide markets and therefore investment opportunities for our businesses.
This means you businessmen have to share the wealth that we should help you generate – by gradually increasing wages and tax rates (fiscal spending by governments also pushes up aggregate demand). The principle of “prosper your neighbour” really holds true here!
In this, we might find an ally in China. China needs to raise its own domestic aggregate demand to provide adequate employment growth. Not only has consumer demand tailed off in the West, an ongoing trade war further limits US demand for China goods.
So China has to find new markets for the goods that it produces. Otherwise with the largest industrial working class of the world, “Communist” China might soon face a serious workers’ rebellion!
China’s wage rates are already going up. We should increase our wages in Asean in tandem with wage increases in China. And use increased aggregate demand in Asean to create a regionally integrated manufacturing and research and development hub.
Take seriously Unctad’s 2019 Trade and Development Report that was released on 25 September 2019. One of the nine proposals in the report was unitary taxation of transnational companies’ profits with a global minimum effective corporate tax rate on all their profits set at 20-25%, ie the international average of current nominal rates, to check tax-evading illicit financial flows.
Are our business leaders aware that many of the multinational companies helming the global chains use transfer pricing to declare their profits in low-tax regimes, including tax haven accounts. Thus, they avoid taxes in their home countries as well as in the countries where they outsource production.
We need to act globally to ensure that fair taxes are paid where value is created. And we will not be alone in this. Even citizens in the EU and in the US are pushing for proper collection of taxes from the multinational companies.
So in response to your lament in Free Malaysia Today, PSM would like to say, yes, you play a role in wealth creation and we would like you to enhance this capacity.
But sustainable wealth creation requires retention of a greater share of the wealth we are creating, growth of domestic Malaysian and Asean aggregate demand and diversification and integration of the Asean economies.
This is obviously going to take time and effort, but you businessmen have to first climb out of the neoliberal box that the Bretton Wood institutions and the WTO have put you in so that you can contribute more to the development of the Malaysian/Asean economy.