Let Praise When Praise is Due.

In good time and about time. As they say never too late.
Its not debated and passed through in Parliament yet, but hey, this is a good start. I praise Pak Lah for making the announcement, its good politics.
This is monetary and fiscal expansion, because Govt has to print more money to do this, its not likeky to be financed solely from the country's revenue (tax) and fiscal because its increases Govt expenditure.

Classic Keynesian expansion.
The resulting economic growth effect wouldnt be felt, provided that the quantum of pay rise is significant enough, wouldnt be felt until 12 to 18 month in the future. So dont expect to see a rise in inflationary expectation yet.
Why?
The lower income civil servants, the bottom of the food chain, has such a low income that they have to supplement by working other jobs.
Lets assume that the Govt give a pay rise of 40% for the lowest income. (The lowest payscale is RM450 a month) This might change the work-leisure behaviour of the worker affected in the longer term. Yet in the short term, nothing changes. In the immediate short term, extra money from pay rise would most likeky be used to pay debts. After that, the immediate needs, like better food and clothing, motorbike etc.
Only then this pay rise has economic impact on the country's economic activity.
What if the pay rise is insignificant? Like 10% or 20%?
The euphoria might turn into anger, and the civil servants might as well campaign for the opposition in the next election.

If the de facto opposition leader, Anwar Ibrahim read this, he better come up with a much better economic manifesto.
E.g:
1. Pay rise for Govt servant at least 100% for the lowest income. (hey, thats only RM900 per month for 42? hour week) And maybe 10,8,5% for those already above RM900 a month.
2. Minimum wage law for those in the private sector.
3. Fiscal responsibility law for the Govt so that Govt wont be able to spend money on useless things.
4. Freeing up financial markets.
and a few other things.

Government servants deserve pay rise, says Pak Lah

By SHAHANAAZ SHER HABIB and V.P. SUJATA
KUALA LUMPUR: All government servants will get a pay rise “because they deserve it,” said Datuk Seri Abdullah Ahmad Badawi.

“That’s how we all feel about it,” said the Prime Minister.

He added that it had been a long time since government servants had received a pay increase.

“Everyone will get the pay rise – only the quantum will differ. We want to narrow the gap between those who earn more and those who earn less.

“Right now, the gap is too wide and this might not be a good thing because the higher income group can afford more than the lower income group and this could be a problem,” he told reporters after opening the World Halal Forum 2007 here yesterday.

On how much the pay rise for the 1.2 million civil servants would cost the Government, Abdullah said the numbers would be known only after a decision had been made on the size of the pay package.

Earlier in Putrajaya, when speaking to staff in the Prime Minister’s Department during the monthly gathering, Abdullah said that the Public Service Department (PSD) was carrying out a study on the pay rise.

He said the Government was taking into consideration the increase in the cost of living which had burdened the workforce, especially those earning less.

However, he said that the Government had also been considerate enough to provide civil servants various allowances in the past, such as the Cost of Living Allowance.

“There should be a pay rise but the question now is the quantum, only (PSD director-general) Tan Sri Ismail (Adam) knows; what he is going to recommend, even I do not know,” Abdullah said, adding that an official announcement would be made after the study was completed.

The Prime Minister also urged civil servants to improve in their work and to provide “fast, accurate and fair” service to keep the public satisfied.

“I know our work is a lot but we have to do it as it is our work and responsibility.

“We cannot limit the number of files or appeal letters to process each day, for example, process only 10 when there are heaps more received,” he said.

Meanwhile, Cuepacs president Omar Osman said the Prime Minister’s statement gave hope that its proposal for the pay increase would be a reality.

He said that Abdullah also made it clear that the organisation’s memorandum was studied closely and taken into consideration.

“His statement shows that our hope of getting a pay rise was not wishful thinking after all,” he said, adding that he was not sure if 100% of its request would be fulfilled.

At the May 1 Workers Day celebrations, Cuepacs had reiterated its call to the Government for a pay rise, asking for a quantum of between 10% and 40%.

Omar was especially happy with Abdullah’s statement to offer a pay rise with a differing quantum, to narrow the gap between those who earned more and those who earned less.

He also advised civil servants to improve and provide first-class skilled service.

“This will in turn enhance our integrity, personality and the image of the civil service in the public eye.

“We would not want the Government to regret giving the pay rise,” he said.