Thursday, May 24, 2007

my write up in Malaysiakini.

Pay rise: What about the rest of us?
Noor Yahaya Hamzah
May 24, 07 2:05pm

I refer to the malaysiakini report Up to 35% pay hike for civil servants.

I am happy for government servants, the police and the army personnel. When did they last have general salary increase? Well, I don’t remember, that’s how long ago it was since the last salary increase. If they count on their annual performance salary increase, that hardly covers inflation.

I have relations, ie, a brother, a sister, in-laws and uncles and aunties in government service. Quite a few of my old friends are in the teaching profession. Their monthly salary is just enough or less. I remember a friend who had to supplement his income by selling Amway products, and another friend who worked part-time every night for RM3 per hour at Makro Shah Alam.

Another man sold ‘nasi lemak’ every night at Puduraya. Yet they continue on working as government servants during the day, because their salaries make up the bulk of their income, and they want to keep their pension from the government in later years. I admire them for their tenacity.

Some people say that the cost of this increase in salary is RM8 billion per year. I haven’t done the calculations, too much hassle. In Keynesian terms, this increase in government purchase of RM8 billions will push the economic equilibrium upward. If, currently, the GDP is sitting at RM100 billion, the economic equilibrium after this would be more than RM108 billion.

The final figure will depend on marginal propensity of consumption (MPC). So assuming that all government servants’ purchases are done locally (no imported stuff) with a MPC of 0.8 (savings rate of 20%), then we can expect the new economic equilibrium to be at around RM130 billion.

Who cares about such details anyway? The important thing is that there will be economic growth for a few years to come. With this new impetus for economic growth, there will be hundreds of thousands of new jobs created by the expanding economy. You see this as the government servants spend a little bit extra on goods and services.

More jobs would be created, and this will have a flow on effect. If unemployment is high, this will lower the unemployment rate, but if unemployment is low, say below 2 percent like today, this would create upward pressure of wages.

I am okay with increasing wages for the low-income workers. I am also happy with highly productive workers getting their due rewards. But I am concerned with low-income workers who don’t have proper representation and are denied wage increase that are due to them. For this, I blame the government for not allowing them to join national unions who can fight for their cause.

Also, the fruits our nation’s prosperity should be shared among us all. Very soon, in about a year’s time, we would start to have a shortage of workers. I suggest that the government start formulating and push for a Minimum Wage Law through Parliament.

With minimum wage in place, our economic planners could reallocate our labour resources from not profitable sectors to more profitable ones. For this I support MTUC in calling for pay review for the private sector. Let’s call for RM5 per hour minimum wage rate.

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