Thursday, June 28, 2007

Is Low wage = competitive?

I have written about Minimum Wage in Malaysiakini a couple of times. Here is a report in Malaysiakini.
Here is an interesting theory put forth by no less than our Human Resources Minister, one Datuk Seri Fong Chan On.
'He said that if the Government were to comply with the demand, the country would lose its competitive edge.'
His theory said that if Govt set minimum wage at RM900 a month, Malaysia would lose its competitive edge.

More or less he is implying that "let the workers eat grass, so that the ruling class can eat cake, drive Mercs and live happily ever after".
That sounds like Marie Antoinette isnt it? When she was informed that the poor working class dont have bread to eat, she retorted, "let them eat cakes instead".

Let us inform our beloved Minister that our workers are practically eating grass already.
We are more or less an open economy.
We import our needs, food, clothing and lately (for the past 20 years) labour force, and to earn our way, we export electronics, services, palm oil and sand (to Singapore) and lately land titles (IDR).
Our ringgit has been fixed until lately, when it was floated because China gave up fixing the Yuan to the dollar (after so much pressure from USA).
Competitiveness is the SUM of all things that we do better than others.
Competitiveness has nothing to do with paying RM300 per month for our factory workers. Yes its true that our factory workers get paid that low, wages that not enough to buy food for one person more than a week.

Let me digress a bit.
During the economic crisis of 97, what did Govt do to regain competitiveness?
Answer: Devalue the ringgit.
The ringgit was free floated then, so when everyone including our own corporations sold ringgit, we let the value fall.
Other countries did the same thing, South Korea let their Won fall, so did Indonesia.
One China's territory (Hong Kong) maintained their dollar value, as a result prices falls. Real estate prices fall, people lose jobs and some companies close shop.
What does recent rises in the value of ringgit vis a vis USD tell us?
Answer: The flow of funds into USA is slowing down.

Let me tell our Human Resources Minister, that to maintain and improve competitiveness we must continue to invest in our human resources capital, as well as our financial and infrastructure capital.
By keeping our workers wages low, our companies would choose to employ more workers to increase production instead of improving efficiency and get better return per capita. Workers would have to work longer hours to keep up with the rising cost of living. ie workers would have to work longer and harder instead of smarter.
As such we dont move up economic ladder.

Let me make it clear, this issue (minimum wage) is not about competitiveness. Minimum wage is about fair distribution of income between owner of capital, managers and workers. Its about social justice.
Workers are only demanding fair wages, wages that pay for a decent living.

This report from The Star
Drop demand for RM900 minimum wage, MTUC told


SEREMBAN: The Malaysian Trades Union Congress should be practical and drop its demand for a RM900 minimum wage for all private sector employees, said Human Resources Minister Datuk Seri Fong Chan Onn.

He said that if the Government were to comply with the demand, the country would lose its competitive edge.

“Let’s be reasonable, we cannot allow our economy to be too rigid,” he said, adding that a blanket ruling could not be applied to workers in all sectors.

Dr Fong said the Government was prepared to discuss the matter with the MTUC but adopting a confrontational approach would not benefit anyone.

Yesterday, the MTUC organised one-hour pickets at several locations in the country. The biggest was held outside the EPF headquarters in Jalan Raja Laut in Kuala Lumpur in which some 1,000 workers participated.

Apart from the minimum wage, the MTUC is also demanding a RM300 cost of living allowance (Cola) for private sector workers.

“If we have a minimum wage of RM900, we would have to pay foreign maids as well as part-time workers the same amount. We can’t do that for everyone,” said Dr Fong.

The minister, however, admitted that a minimum wage could be introduced for workers in certain sectors such as dock workers and cargo handlers.

The minimum wage for most other sectors should be left to market forces, he said.

On a separate matter, Dr Fong said Socso paid out close to RM1bil in compensation, pension and survivors’ benefits to workers or their dependents last year compared with RM890mil in 2005.

However, it managed to collect RM1.5bil last year compared to RM1.3bil in 2005.

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