Wednesday, May 11, 2016

MALAYSIA:::New Minimum Wage Of RM1,000 To Be Enforced This July: What Is The Real Effect?

PUT yourself in the shoes of someone earning minimum wage. No, we are not talking about the foreign security guard or construction worker but everyday Malaysians living in small towns and villages throughout the country.

Take for example husband and wife F and K, whose combined wages as general worker and a cook at a private establishment respectively totalled RM1,400 per month. With four kids and three are at schooling age ranging from 7 to 15 and a 10-month old baby, life on minimum wage is a daily struggle, whose story was shared by a reader on blogpost
Before minimum wage was enforced, K only got RM700 as his company decided to pay him lower as a general worker. The couple still depend on K's elderly mom for a roof over their head.
Although they live in a village and not in the big city, a car is still a necessity and they have to scrape together to service the monthly car loans.
Even young graduates are not spared. The blogpost also shared the story of young N, a fresh math and science graduate from a local university.
With no experience and living in a village, she joined a nearby manufacturing company as a shipping executive and is earning RM900 per month.
Her net pay is only RM800+ after deductions with no overtime.
“I am still struggling the save some money. And with my low wages, I think I have to shelve my dream of owning a Myvi car for now,” N confessed that she still lives with her parents to save costs.
Khazanah Research Institute had conducted a nationwide survey in 2013 on how much do Malaysians really earn and compiled the data as shown below:
Minimum wage is like a double edged sword. If it is withheld, workers on the lower end of the wage scale will suffer as living costs and inflation bite.
If it is implemented, businesses can be affected to the point of shutting down, starting a domino effect of rising unemployment, dive in retail spending and increasing burden on government welfare.
New Minimum Wage: To Proceed Or To Delay?
The Minimum Wage Order 2016 ('Perintah Gaji Minimum' PGM2016) which was gazetted by Parliament will take effect on July 1 this year for all employers regardless of the number of employees nationwide.
Under the MWO 2016, it requires employers in Peninsular Malaysia to increase the salaries of their employees from RM900 to RM1,000, while employers in Sabah and Sarawak are required to increase the salaries of workers from RM800 to RM920.
Last Monday, the Malaysian Employers Federation (MEF) executive director, Datuk Shamsuddin Bardan said about 30,000 employees, especially at lower level, may be retrenched if MWO 2016 was enforced while expecting in total 60,000 workers will be retrenched this year if MWO 2016 was enforced, allowing for the minimum wage to be raised to RM1,000 for workers in Peninsular Malaysia and RM920 for those in Sabah, Sarawak and Labuan.
As expected, employers have been up in arms over the impending enforcement citing the unfavourable economic conditions with our currency yet to regain financial health with the Malaysian Employers' Federation warning of up to 30,000 workers being laid off come July 1.
This, in turn, sparked off disagreement and triggered voices of discontent from workers, trade unions and labour groups – with many are of the view that Malaysian workers are underpaid, thereby opposing the postponement of the new minimum wage given the sky-rocketing costs of living in recent years.
To find out what is at the back of Malaysians' mind on the new minimum wage, Malaysian Digest reached out and spoke to stakeholders such as the trade union, workers NGO and a labour group which represents oppressed communities campaigning for workers' rights in the country.
“We Do Not See The MEF’s Sincerity In Helping Workers To Escape From Poverty Trap” – CUEPACS
Speaking to Malaysian Digest, the Congress of Unions of Employees in the Public and Civil Services (CUEPACS) president Datuk Azih Muda (pic) said Malaysian Employers Federation (MEF)’s move at railroading the new minimum wage is a threat which tries to influence the Government policies.
“CUEPACS strongly condemns the federation for issuing such an unfounded statement. Their attempt (to demand for the postponement of the new minimum wage) is a form of threat and pressure to the government in their efforts to improve the living standards and productivity of workers in both public and private sectors.
“We do not see the MEF’s sincerity in helping workers to escape from poverty trap.
"Instead of resorting to such unreasoning endeavours, the federation should support the government’s move to increase the minimum wage for our workers as it is part of their efforts to the betterment of the well-being of all Malaysians.
“However, it seems to me that they want to destroy all the paths out of poverty. Is this the way MEF deals with the problem confronted by our workers in the country? Or is this a ‘surprise gift’ for our workers on Labour Day?" asked Azih.
Azih also cast doubt on the possible retrenchment of 30,000 workers as predicted by MEF if (the new) minimum wage is enforced, saying that this may imply MEF’s support on the recruitment of foreign workers as a replacement for local ones.
“Is this the actual reason they issued such a statement? Or is it an implication that they are more interested in hiring foreign workers to replace the laid-off workers so that they could pay less for operating costs and workers’ wage?” he further questioned.
The president of CUEPACS continued: “MEF should be more sensitive to the living standards of workers in the country due to the rising cost of living. Employers who are faced with problems in implementing the new minimum wage must find a solution.”
“We foresee no problem for the government to implement the new minimum wage as it is part of their economic planning to raise the living standards of our workers. By which I mean, employers should seek consultation from the Ministry of Human Resources (MOHR) or other authorities concerned if they are faced with issues in implementing the new minimum wage,” he added.
“I Must Maintain My Stance That The Probability Of Retrenchment Or Even Closure...Is Small" - MTUC Sec-Gen
In an interview with Malaysian Digest, Malaysian Trades Union Congress (MTUC) Secretary General N. Gopal Kishnam (pic) strongly opposes the MEF’s stand and hopes that implementation of new minimum wage will continue as planned.
“MTUC holds on tight to the notion that the latest new minimum wage, at any situation, will not be a huge burden for employers even though we are disappointed with government for not considering the proposed RM1,200 as minimum wage for workers in the country.
“We believe that the new minimum wage would not burden the employers as the salary increase was not that high. It is ridiculous (for them) to say that the implementation of the new minimum wage rate will lead to dismissal of a whopping 30,000 workers of lower rung,” said N. Gopal.
Referring to MEF’s statement on the possibility of mass retrenchment if the new minimum wage be implemented in July, he opined: “I must maintain my stance that the probability of retrenchment or even closure of business because of rising labour costs is small."
“This is because employers will only resort to such action only when the economic situation really deteriorated. No employers were forced to close their business and no big increases in production costs when the minimum wage was introduced three years ago,” he pointed out.
“Hence, we firmly believe that implementation of minimum wage will bring advantages and positive impact to the employees and the nation as a whole. MTUC believes that similar benefits will be felt by employers in the long run, although teething problem might be expected at the onset,” he observed.
“Regardless, the government ought to take all necessary measures to ensure that the minimum wage of RM1,200 to be implemented without further delay as the increase in minimum wage was a bonus to the Malaysian workers who are facing an uncertain global economic situation,” said N. Gopal.
“Therefore, we sincerely hope that the government will continue to implement the long overdue new minimum wage without falling into the trap set by certain quarters,” he reiterated.
History Is Repeating Itself, Labour NGO Observes
The secretariat member of Jaringan Rakyat Tertindas (JERIT) M. Sivaranjani (pic), an NGO which represents oppressed communities campaigning for labour rights, called on the Malaysian Employers Federation (MEF) to stop its attempt at railroading the new minimum wage of RM1,000 in the peninsula which will be implemented in July this year, blaming the federation for playing political chameleon on this issue.
“MEF should be ashamed to give such a misleading statement. In fact, the new minimum wage should have started earlier this year. Thus, it is safe for us to say that MEF is playing its tricks to delay the implementation of the new minimum wage," M Sivaranjani told Malaysian Digest when contacted.
"This was not the first time the MEF issues such an unreasonable statement, they had previously  objected the implementation when the government first introduced minimum wage in 2013.
"They successfully delayed the implementation of the minimum wage for a year for all small and medium enterprises (SMEs), resulting in the full implementation of the minimum wage only starting in January 2014," she said.
"Unfortunately, the history is repeating itself as MEF is trying to convince the government to delay the implementation of the new minimum wage,” she noted, adding that the new amount of minimum wage was fixed in accordance with the Minimum Wage Order (MWO), which is reviewed every two years.
“MEF's objection against the new minimum wage was, in fact, uncalled for. Over the years, workers, trade unions and labour groups have been demanding for a minimum wage of RM1,500 but it was eventually rejected and the prime minister during Budget 2016 (presentation).
“It is only a small adjustment (in the new minimum wage) compared to millions of profits made by employers as it was merely raised by 11% and 15%, respectively. Besides, the new minimum wage is just RM50 higher than the poverty line (RM950) set by the government,” explained Sivaranjani.
“In saying which, I must say that an increase of RM100 and RM120 compared to the escalating cost of living in the country was relatively small, considering the rising costs of living these days.
"Most importantly, a higher minimum wage would surely reduce the dependency on foreign workforce as better wages would attract local ones,” she further stressed.
Did You Know That The United States Has A Less Generous Minimum Wage Than Malaysia?
Are workers in Malaysia really underpaid and overworked as alleged by labour NGOs and trade unions?
If we take a step back and look at the global scenario and analyse comparable data worldwide, Malaysian employers are not underpaying its employees that badly as it turns out.
According to a Thompson-Reuters Breakingviews survey compiled in 2014, the United States has a less generous minimum wage than Malaysia, Mongolia, and Pakistan, judging by one metric catalogued byThompson-Reuters’ Breakingviews, a report on economical news portal reports.
FilePic: thinkprogress.orgFilePic:
"The U.S. minimum wage pays just 28 percent of the country’s per-capita gross domestic product. That means a year of full-time lobar at minimum wage would earn an American worker just over one quarter of the average financial prosperity the American economy creates.
"Of the 31 countries Breakingviews analysed, just Japan, China, Indonesia, Hong Kong, Russia, and Mexico have less generous wage floors relative to the total prosperity their countries produce.
"The minimum wage in Malaysia guarantees a worker will earn at least 31.7 percent of what the Malaysian economy produces per Malaysian.
"The ratio is over 43 percent in South Korea, 45.5 percent in India, and 60.1 percent in New Zealand, and the average is 42.25 percent for countries where World Bank data makes the calculation possible," the article points out while going on to highlight the disconnect between economic productivity and individual rewards.
While most readers can identify with the employee's viewpoint about the dire need to increase wages, the wage hike should also be accompanied by improved productivity to make the extra cost to be shouldered by the employer economically viable.
In return for earning higher minimum wage, workers must also be receptive to learning new skills, be adaptable and flexible, even relocating and most importantly to be proactive in improving their own productivity and efficiency, social welfare NGO Research For Social Advancement (REFSA) highlighted in a 2013 study on raising household income in Malaysia.
“At the end of the day, higher income for Malaysians is a win-win. Taxes are like condominium maintenance fees – the more people contribute, the more it benefits everyone.
“Higher income = More people can afford to pay taxes = Malaysians have a stronger say in how our Budget is spent + More funds for developing the nation.”

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