Dissecting Kula’s New Minimum Wage Recommendation within 16 Months

by S.Arutchelvan (PSM Central Committee Member)

Recently under intense pressure to raise the minimum wage, YB M.Kulasegaran – the Human Resources Minister said that a review will be done within 16months on the question of minimum wage.(Bernama, 20 April 2019).  This is actually no breaking news because whatever he says, under the law, the Minimum wage must be reviewed within 2 years which means the next review must be 2021. Now let’s dissect his statement further so that we don’t get fooled over and over again.

Have the Government been fair in reviewing the Minimum wage  every 2 years?

The last minimum wage was implemented on 1 January 2019.  The first Minimum Wages Order 2012 was gazetted on July 16, 2012 to be effective from January 1, 2013. This means that a review was due in 1 January 2015. But the new wage was only implemented in July 2016.

So this is the history. Why a review cannot be promptly put in place? Many studies have proven that Minimum Wage in Malaysia is low and is suppressed. Now by delaying the Minimum wage implementation every 2 years, is a further violation to these low earner workers.

Date  Review Actual Review Delay Rate
First MW 1-1-2013 1-1-2014 (all companies given an extension for 12 months) 12 months RM 900 (PM)

RM800(Sbh&Swk)

First review 1-1-2015

1-1-2016

1-7-2016 18 months

6 months

RM 1000 (PM)

RM920(Sbh&Swk)

Second review 1-7-2018 1-1-2019 6 months RM1100
Third Review 1-1-2021

Now the first task of the Minister is to ensure, that a new wage is in place on the dot . We are fed-up of listening to further studies needed to be done especially in the last 3 months before the new wages are to be implemented. So YB Kula need to have a clear timeline from now that on 1 January 2021, a new minimum wage will be announced.

Who decides on the minimum Wage?    

Two days ago, YB Kula says that “After obtaining the appropriate rate, the committee will submit the recommendation to me(Minister) to be presented to the cabinet before it is to be decided and announced to the public”.

This is the SOP but this is not what happened the last time.  Last year, the Prime Minister announced the Minimum Wage and he always said that he was advised by the Minimum Wage  Council. The Minimum wage announced by the Prime Minister last year was a total sham which none of his cabinet was brave enough to comment on it. Even YB Kula, the Minister in-charge said that it was in the Prime Minister’s hand. Finally the Prime Minister office issued a statement of RM 1050. Who advised him on that figure?

Now let’s look at their rule of law which the PM is so fond of saying. If we take the formula used by the Wage Technical Committee, then they take into account the following items when determining the minimum wage. These components are  poverty line, productivity growth, consumer price index, unemployment rate(actual, region), average wage per household and medium wage. Based on this formula itself, our calculation shows that the minimum wage for Peninsular Malaysia should have been RM 1,368 and Sabah and Sarawak respectively RM 1,175 and RM1,185.  The Wage Council actually then proposed a rate which was RM 1170 to the Cabinet. But what the Prime Minister announced was RM 1050 which was the recommendation of the Employers Federation. Only after a big public outcry and protest at Parliament did the Finance Minister announce another RM 50 increase making it RM 1100.

Now once again, will the Minister take the views of the Minimum Wage technical Committee seriously when even their formula or their recommendation is not taken into account as proven in the last announcement?  Why their recommendation cannot be made public and need be hidden under the official Secret Act? Why are we spending millions of ringgit with this Committee when their views are not taken into consideration?. Therefore the second task of the Minister is to give independence to the Committee and allow wages be determined by them and not the bosses like done in the last one. Will the Cabinet follow this or let Tun or the Employers Federation determine the wages?

All arguments against increasing The Minimum Wage was demolished, now what?

The most critical matter is all studies have shown that Malaysia wages are low. We have the lowest purchasing power in Asean. In last year alone, 40% richest person in Malaysia saw wealth increase by another 30%. Mahathir himself have said that GDP growth benefited the capitalist and not the workers. Mahathir said that while Malaysia GDP growth is considered one of the best in the region, only one third of its total would benefit workers. This is coming from the mouth of the same Prime Minister who ensured that minimum was never implemented when he was the PM for 22 years. Now let’s look at the other arguments.

The Government does not have enough money – blaming the previous Government?

Minimum wage does not impact Government workers. Infact the Minimum Wage for Government workers is much higher which is RM 1200. In states like Penang, Selangor and Johor, minimum wage for Government has been declared at RM 1500.

Most SME will close down?

This was the same argument used when Minimum wage was first introduced. On the contrary, the SME growth has increased from 33.1% to 36.6% GDP between 2013 to 2016. In 2017, SMEs contributed RM435.1 billion last year with a real GDP growth of 7.2% . Overall , SME contribution to Malaysia’s GDP rose to 37.1% in 2017 from 36.6% in 2016.

Malaysia workers Productivity is low?

Based on Bank Negara Report 2018, Malaysia workers are paid lower. “Analysis of the wage to productivity ratio shows that Malaysian workers are still being paid less than workers in benchmark economies, even after accounting for the different productivity levels across countries. This suggests that Malaysia’s current wage productivity levels are misaligned. The Bank Negara report citing an example said that if a Malaysian worker produces output worth US$1,000, he would be paid US$340 compared to US$510 received by workers in corresponding wage for producing the same output.

Investors will run away?

PSM has on many occasion proposed for a Asean level Minimum wage and Asean level corporate tax to ensure, the capitalist don’t make the countries in the region compete with each other to race to the bottom.

Anyway  if we have good economic and good governance policy not linked to kowtowing and other corruption coated schemes, then investors will stay.

MAY day wish!

Last year, the top 40% richest person in Malaysia increased their wealth by 30%. Real wages have not gone by for the last seven years. In contrast, Merdeka Centre study in 2017 with 1203 responded revealed  about 15% Malaysia skip one meal a day, 64% suffering from stress related to economic problems, 40% make late payments in their electricity and telephone bills and 30% have less than RM500 in their savings.

It is time for the PH Government to stop talking about trying to increase the minimum wage to RM 1500 when their first term ends because recent studies by Bank Negara has clearly stated that minimum wages need to be at least RM 1,800 now. These is the figure put by MTUC and we call upon the Government to raise the Minimum wage in order to boast our economy as well as create a dignified society based on decent pay.

We retaliate to call made by Bank Negara Governor, Datuk Nor Shamsiah Mohd Yunus who said that currently, workers in Malaysia are not paid equitably despite playing a larger role in the production process of labour-intensive industries such as wholesale, retail and food and beverages.

Bank Negara in its study “The living wage: Beyond making ends meet”, highlighted that the  bottom 40 per cent of households in Malaysia cannot keep pace with the cost of living and said their earning are just not enough. Bank Negara estimated the provisional living wage should  range between RM2,700 and RM6,500 per month in the capital. The living wage for a single adult was RM2,700 per month, RM4,500 per month for a couple without children, and RM6,500 per month for a couple with two children.

YB Kula and the PH Government should really look into these issues of wages. The well being of the workers will ultimately decide who run this country. Real wages issues are real issues. This year May day will be a good time to appreciate the workers for their contributions and to pay back their long overdue dues.

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