Thursday, April 22, 2021

The Minimum Wage Or Living Wage Conundrum.

 The Minimum Wage Or Living Wage Conundrum.

1. Why Was A Minimum Wage System Introduced By The Government?

When our government introduced the National Wages Consultative Council Act 2011 (Act 732) it was intended to address the low wages that was prevailing in the country especially so in the private sector. As we would recollect employers were, then, paying very low basic pay not only in the Klang valley but throughout the country. Pursuant to the said Act, the Minimum Wage Order 2012 was introduced wherein a minimum wage of RM900.00 was established.

Thus, the underlying factor, for the government to introduce the Minimum Wage Order, was to mitigate the unfair low wage system that was prevailing in the country. It was a case of government intervention when the employers failed to pay equitable rates of pay, thus, driving wage levels to what was described as the race to the bottom!

Fast forward to 2021 and what we need to ask is whether the minimum wage system is still relevant given the fact that wages, even for degree holders, has been compromised on account of the weak employment labour market.

2. Youth And Graduate Unemployment

Unemployment, among the youth in 2020 terms, is estimated to be 11.72% whereas total unemployment is hovering in the region of about 4.8%. Even more alarming is that, about 70% of jobs seekers were youths according to a report published by the EIS-UPMCS Center For Future Labour Market Studies.

According to a Ministry Of Higher Education survey about 10% of fresh graduates were paid between RM1001 to RM1500.00 a month since 2010. The said survey also found that, in 2020, more graduates fell into the said income bracket reaching a decade high value of 22.3%.

The said statistics, in my view, seems to suggest that low wages, amongst the youth and fresh graduates, has a nexus with the high rate of unemployment among the youth and fresh graduates. With the prevailing economic conditions our youth. and fresh graduates, are forced to accept low wages just to secure a job however incompatible the wage maybe.

Low wages, by any standards, is an indication that our young workers are being exploited on account of the prevailing depressed employment opportunities.

3. Is The Existing Minimum Wage System Still Relevant?

A study, by Bank Negara Malaysia in 2018 has stated that, for a single adult to sustain himself in Kuala Lumpur he would need RM2700.00 a month. The said study has also revealed that a couple without children needs RM4500.00 and a couple with two (2) children would need RM6500.00 a month.

The said study is based on the consideration of what is termed as a "living wage" - "living wage" defined as the minimum income necessary for a worker to meet his basic needs including food, housing and other basic necessities.

On the contrary a minimum wage is so set by the government with the aim of protecting workers against unduly low pay.

Given the 2018 Bank Negara study the truth is that the middle and low income (the B40 and M40) workers are not earning sufficient household income to sustain themselves. As a consequence workers are forced to work excessive hours of work - overtime, work on rest-days, public holidays and even working a second job to supplement their household income.

Working prolonged hours, and by extension enhancing production for employers, results in the deterioration of the workers' physical and mental health.

In my view working prolonged hours of work is as good as modern day slavery wherein, in the absence of a decent sustainable wage for a 8 hour work day, a worker is forced to supplement his income by working excessive overtime, working on rest-days, public holidays and even taking on a second job.

What, therefore, needs to be postulated is whether the existing Minimum Wage system is still relevant under the circumstances.

4. A Living Wage Module As Opposed To A Minimum Wage System.

Professor Yeah Kim Leng from the Sunway University Business School has opined that, given the Bank Negara study 2018, workers will need a side income to make ends meet on a minimum wage of RM1200.00 (FMT 28.10.2019).

It is, therefore, apparent that workers cannot survive on the current system of a minimum wage of RM1200.00 a month.

Given the said reality what that needs to be deliberated is whether there is a need for a paradigm shift from a "minimum wage" system to a "living wage" module.

In my opinion the existing National Minimum Wage Council ought to be re-branded to a "National Living Wage Council" with the absolute power to decide on a "living wage" rate of pay without being subservient to the government.

As no wage system can remain stagnant, a bi-annual revision of the "living wage" as is the existing mechanism in respect of the "minimum wage" ought to continue.

5. Correlation Between The Rate Of Unionisation And Wage Inequality

It is argued, through academic research, that there is a correlation between the rate of unionisation and income inequality - the lower the rate of unionisation, the higher the income inequality.

In Malaysia it is an indisputable fact that the existing labour laws impedes organising efforts by unions.

Take for example the case of the electronics workers. According to international standards the electronics sector is classified under the E&E (electrical & electronic) sub-sector. Going by that internationally accepted classification the existing Electrical Industry Workers Union (EIWU) ought to have been accorded the right to organize the workers in the electronic sector.

If the EIWU had been accorded the right to organise the electronics workers, the chances are that wage inequality could have been addressed, substantially, in that sector that employs thousands of workers.

But the government did not permit the EIWU to organise the electronic workers so as to suppress the numerical strength of the EIWU and, in the process, prepertuate wage inequality in the electronic sector. Ultimately, the government's ploy was to dilute the unionisation of the electronic workers into a regional demography.

It is, thus, obvious that a fundamental flaw, in the country's income inequality, exist in the correlation between the rate of unionisation in the country.

Where unionised workers are covered by collective agreements, which provides for salary adjustments once in three (3) years, an estimated 93% of the unorganised workers are left at the whims of their employers in granting such periodic salary adjustments. And, where unionised employees are entitled to annual salary increments, by virtue of the collective agreements that are in force, 93% of unorganised workers have no legal right to demand such annual increments from their employers.

What then is the challenges in matter?

Until, and unless, laws that curtails organising efforts are removed our trade union movement would continue to function without the strength of numbers. In the absence of laws that would promote a vibrant and progressive labour movement we would continue to function as an ineffective movement to transform the socio-economic position of the working class. Under the circumstances, the trade union movement has to pursue a transformation of the existing repressive labour laws so as to provide a conducive legislative eco-system that would promote unionisation of workers.

6. CUEPACS - Minimum Wage Of RM1800.00 For Civil Servants

An economist, Shankaran Nambiar from the Malaysian Institute Of Economic Research, whilst agreeing that the current minimum wage cannot meet the minimum living standards (of the civil servants) nevertheless was of the view that the government should wait for the economy to improve before raising the minimum wage.

That, proposition, in my view, is devoid of any probative justification for the simple reason that the government is under an obligation to address the income disparity that is already existing so as to ensure that the civil servants are paid an acceptable "living wage". And, by extension, I would argue that a "living wage" should also be implemented for the private sector workers.

In parting I would also argue, that, the government must accord CUEPACS the right to collective bargaining pursuant to ILO Conventions 98 read together with Convention 154. CUEPACS, as the single largest trade union organisation representing civil servants, must be given the right to collectively bargain for and on behalf of the civil servants and not be at the mercy of the government to dictate wages and terms and conditions of employment of the civil servants.

Fundamentally, the right, to collective bargaining, must be accorded to CUEPACS consonant with the guiding Conventions of the ILO.

So, what position should the labour movement take in the circumstances?

7. Conclusion

The challenges are set-out in clear terms.

Firstly, the labour movement has to, relentlessly, pursue a transformation of the embedded pro-employer labour laws. We need to continue our struggle to ensure that the government confirms with the core ILO labour standards such as Convention 87, 98, 154,190 etc.

Secondly, we need to pursue a holistic realignment of the social-economic policies of the government that has given preference to employers which has margainlised both the working class citizens of the country and the trade union movement.

Thirdly, we need to demand that the out-dated Minimum Wage System be re-calibarated to an "living wage" module based on the 2018 Bank Negara study.

Opinion Piece by:-
K. Veeriah
24, Jalan Goh Swee Huat
Taman Bukit
14000 Bukit Mertajam
016 4184520

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