Thursday, December 04, 2008

My letter in Malaysiakini

link here
Wait a minute, can S'gor enact minimum wage law?
Noor Hamzah | Dec 2, 08 4:48pm
I refer to the Malaysiakini report No minimum wage as yet.

There has now been a proposal for RM1,000 minimum wage for Selangor. What are the implications? It would be good for Selangor, that’s for sure.

There are millions of Selangor residents currently earning less than RM1000 and some even less than RM400 a month. Just go to rural Selangor for example, and ask around.

Ask those pretty shop assistants wearing the tudung at the local mini markets in Tanjong Karang or Sungai Besar how much they earn in a month and most would readily say it’s RM400 a month.

Those who earn more than RM1,000 a month would probably be a supervisor. A manager would get about RM1,500.

If you work in the Klang Valley, then I’m sure that a factory worker’s basic monthly wage is about RM700 to RM800. Supplemented with lots of overtime, sometimes working 70-80 hours a week, then a factory worker could bring home over RM1,000 a month.

That’s a lot of money.

What if the Selangor government manages to enact a law requiring employers to pay at least RM1,000 a month? Let’s not get into the argument whether the Selangor government can pass a law stipulating a minimum wage of RM1,000 in Selangor.

They will have to go through that hurdle first. What is the scope of Selangor state assembly? Can they pass a law requiring a minimum wage fo RM1,000 for their citizens?

My prediction is that a lot of employers would want their employees earn their RM1,000. So if an employee's work is currently worth RM500 a month, the employer would formulate a new strategy so that the employee's work would be valued at more than RM1,000. Otherwise, why bother employing anyone?

Two strategies can be implemented - either charge more for services and/or products, or make the employee work harder. Both suggests increased efficiency in the economy. An efficient economy adds value, increases GDP and everyone would be better off in the long-term.

So, in the short term, we would see a lot of workers lose their jobs because Selangor employers wouldnt need as many workers as before. Incidentally, Selangor has the largest number of immigrant workers, legal or illegal, from Indonesia, Bangladesh and India. If enforcement is lax (for enforcement of the minimum wage), local workers would simply lose their jobs to their immigrant counterparts.

I would like to think positive.

That enforcement of the minimum wage is fair and being carried out. That workers, irrespective of whether they are local or illegal/legal foreigners get the same treatment, ie, they getat least the minimum wage of RM1,000 for a 48-hour week. (or is it a 40-hour week now?). And that local workers ie, Malaysians are given preference over foreign workers.

Soon, there will be no shortage of labour in Selangor. Malaysians from all over the country, who were previously badly paid elsewhere, would migrate to Selangor. And with a basic wage of RM1000, the hourly rate for overtime work would also be higher.

Given chance to do overtime, they would bring home RM1,500 or more. And the flow-on effect would resonate throughout the state’s economy as higher income would generate higher spending which would also lead to higher leisure spending.

Granted, all thing being equal, there would also be a higher GDP growth for Selangor. Higher income in the long run. The rural base in Selangor would benefit the most. Because most people living in the rural areas have their own land to grow some of their needs, and won’t have to pay rent, because they build their own houses. They also save a higher proportion of their income.

The question is still: can Selangor enact a law on minimum wage

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