Minimum Wage in Malaysia?

Went through a guy’s blog and saw his post on minimum wage, a response on the letter written to Malaysia Kini. Curious to know why he said that the author made a strong case for minimum wage, I spent a little more time in reading through the letter again. And me, (stress) not an economist, seeing what I can think of to rebute her arguments. Readers are welcomed to point out my failure as well.

In our headlong rush towards modernisation, higher GDP per capita and accumulating riches undreamed of in our father’s generation, we have forgotten that as a nation, we must move together and share our resources, spoils and tribulations in good times or bad times.

Hmmm, I am not sure what kind of resources she is referring to. May be it was something about the land which my father bought 10 years and it was a good land producing a lot of crops. Now since the land is so fruitful and productive, it is time to share – freely? Sharing the crops or sharing the land? Anything close to property right there?

Some of us have the luck and ingenuity to move ahead, earn wealth and live happily ever after while some sections of society, whether through their own fault or not, are still stuck in poverty even if they work 12-hour, 6-day weeks.

More importantly, is this “luck” something detestable? I hit jackpot, thousands did not, and am I supposed to be responsible for those thousands who did not hit the jackpot?

Someone commented that we should not implement minimum wage legislation but instead educate the poor so that they can lift themselves out of poverty. Have we forgotten that not all of us have the gift and ability to be educated and learn new skills? Wages and salary, whether high or low, are still a market reflection of supply and demand of labour with particular skills, as well as the person’s ability to negotiate high wages.

Wait, if it is the politicians/policy maker/teachers/education who said this line “not all of us have the gift and ability to be educated and learn new skills”, what are we to think about them (read between the lines: some smart, and sorry for the stupid ones, education can’t help much)? Aren’t every human being is unique and talented at his or her own way? If a guy is good in science, let him work out his way (no hindrance please) to be scientist, similarly if the guy is good in handicraft, let him work out his way to be plumber,mechanics. The labour market is far away about the monotonous demand on doctors or engineers alone. Not everyone need to be doctors or scientist in a society, doctor can not fix my car problem if I have one!

If you are buddy with your boss, and your boss cannot do without you, it’s a no-brainer that you will be able to negotiate high wages. You are your own commodity and your ability to package and sell yourself is the key to your net worth and potential. Does anyone wonder why Siti Nurhaliza is in demand and highly paid?

Then make yourself indispensable in your boss bussiness (learnt that from a senior manager from my ex-company), and the best part is, make yourself so indispensable that even though you are your boss greatest headache, he will still have to pay you well for your worth. You are your own commodity and your ability to package and sell yourself is the key to your net worth and potential. Is it supposed to be a bad thing?

The government further undermines the labour market by doing almost nothing about rampant illegal worker immigration from neighbouring countries. There were cases in the past in Sabah whereby illegal immigrants were given citizenship, hence enlarging the pool of cheap labour.

See the symptom? The push harder for dealing with illegal immigrants. Besides, if you push for higher wages, more employer will be tempted to hire illegal immigrants who can take the job at lower-than-minimum wage pay. Logic?

Introducing minimum wage legislation would bring a lot of benefit to the country. Let’s say that we set minimum wage at RM5 per hour this year. Inefficient companies who cannot afford to pay this minimum wage will have to close shop, freeing labour resources to be employed elsewhere.

And what you get? UNEMPLOYMENT. Freeing labour resources to be employed elsewhere sounds like a good idea, but WHERE is that elsewhere? If the employer of next door is paying higher salary, why do you think the worker is still staying put in the old company? They would have gone long time already. Worker are FREE (they can go or resign anytime they want, can’t they?), but the only problem why they are stuck with the current low wage job is more likely that because there is no competition or demand out there, ergo NOT FREE to choose better jobs.

On the labour supply side, people who normally do not work because of other commitments or unattractive wages, might find RM5 per hour a good and start looking for jobs, thus contributing to the economy.

If people do not work because of unattractive wages, how they survive in Malaysia in the first place (especially the master of the house)? As far as I know, we are not a social welfare state like Sweden or Finland which paid some allowances to the unemployed to sustain their lives. But is there any case that Malaysian choose not to work because of low wage? Let the statistic speaks!

More people on the payroll would increase economic activity, contributing to higher economic growth. Companies would invest more, since the economic climate is rosier. This in turn will spur the country forward to make more capital investment and increase per capita productivity, since employers would not employ employees to do low-value jobs. It will also help employees on a low income as a higher income will ease their burden.

More people on the payroll? Yeah, make sure people are employed in the first place. Employers would not want to hire worker for low-value jobs, but then there is always a low-value job out there, whether we like it or not: construction builder, street sweeping, toilet cleaner, etc. Who is going to do those jobs? And can these jobs be nullified just because nobody want to do a low-value jobs? No, it would just mean that someone will do it, and doing it with a higher price than we used to pay!

Would a minimum wage law would reduce our competitiveness? Would FDI flow to other countries? That is shallow argument hiding the fact that competitiveness is equal efficiency in every aspect of our activity. Who is more efficient, a street sweeper using a truck or a few street sweepers using brooms and baskets?

Let’s say, Malaysia’s minimum wage is RM5 per hour [Malaysia's GDP per capita (PPP) is USD11201], Vietnam [USD 3025], Thailand [USD 8368] is offering RM3 per hour, where does FDI go? Of course there are a lot of variables for foreigners to invest, but wage with the value of it, is one of them, an important one. Put more investment in education, train more knowlegable and skilled labours, that will be give us an advantage in competing with other low wage countries, and will definitely attract more high-end or high-value added technology.

7 Comments

  1. zewt said,

    March 27, 2007 at 3:52 pm

    first of all… no one is indispensible… no matter how close you are to your senior manager or even director. i may not be in the workforce for long, but i think i am in there long enough to know that.

    indeed, having more ppl in the payroll is not the way to solve things. and i think the govt is doing that to keep ppl happy. they are really creating a lot of jobs in the govt to take more ppl.

    however, i have to say minimum age is a good idea. the level of exploitation by employers in malaysia is really getting out of hand. of course, such thing will have pro and cons, but i think minimum age would be a good move to stop exploitation.

  2. johnleemk said,

    March 28, 2007 at 1:09 am

    You might be interested in a debate I had with a couple of other bloggers some time back on the merits and demerits of a minimum wage:

    http://sigma.blogsome.com/2007/02/22/a-challenge-to-neoliberals-on-its-economic-model/

  3. micpohling said,

    March 28, 2007 at 1:51 am

    John:
    Yeah, I looked briefly at it and I saw all the big names and tags: Neoliberal, market failure and stuff like that :P Not to say I dislike it, but reading it without the econ background is a bit painful for me.
    And this post, is supposed to counterargue the letter sent to Malaysia Kini. If I was serious about it, I would have it sent it to Malaysia Kini already ;)
    One more thing is that: I have the feeling that if some people say no to minimum wage, others would view it as heartless and unsympathetic.

  4. micpohling said,

    March 28, 2007 at 2:07 am

    Hi Zewt:
    Glad you came by. “No one is indispensable” is kind of ambigous statement. It depends on the working environment. I wrote it as my background in engineering field: “know-how” and experience is a very valuable asset. I would not say the company will close shop right away because I decided to resign and I have a lot of experiences with me, but it will take another cycle of learning (equivalent to money and resources).
    Unproductive job creation is a waste of resources, worst still when it is done by government and government is paying them with the taxpayers’ money. But will minimum wages solve unemployment? Will minimum create more jobs?
    Level of exploitation: is this referring to the wage or other thing like working environment, sick leave and etc? I thought there is regulation and law for them?

  5. zewt said,

    March 28, 2007 at 10:57 am

    Hi there,

    Well, i dont think minimum wage will help unemployment, it’s quite different. But i think minimum wage will benefit those who really intend to give their energy for working world aka modern slavery.

    on a totally unrelated note…. i think cristiano ronaldo is kinda indispensable to manchester united now :P

  6. nik said,

    April 11, 2011 at 8:20 am

    I was told that 10 rights cannot make 1 really bad thing acceptable. This is because you have not considered what will happen with that decision that seemed very good at the moment. As in the case of minimum wage in Malaysia, I only see bad implications from adopting the policy. The person who wrote to Malaysia Kini have no idea what he was talking about. Welfare issues? For who? Malaysians or immigrants? Anyways, small-m made good points with his arguments. A lot of people write, but not many are reasonable like him.

  7. Chinese Malaysian said,

    August 12, 2011 at 5:54 am

    Why would Employer hire a foreign Bangla Indon worker when they have to pay the same wage as a local educated person?

    This is what Minimun Wage do.

    TS and ^^ try to state your point, instead of putting in all the speculations, philosophy and etc, no one reads them.


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