Monday, December 01, 2008

RM1000 minimum wage for Selangor; What is the implications?

It would be good for Selangor, sure.

There are millions of Selangor residents currently earning less than RM1000, some even less than RM400 a month. Just go to rural Selangor for example, and ask around, ask those pretty shop assistants wearing tudung at local mini market in Tanjong Karang or Sungai Besar, how much she earns in a month, most would readily say its RM400 a month.
Those who earns more than RM1000 a month would probably be a supervisor. A manager would get about RM1500. If you work in Klang Valley then I would be sure that factory basic monthly wage is about RM700 to RM800. Supplemented with lots of overtime, sometimes working 70-80 hours a week, then a factory worker would bring home over RM1000 a month.

Thats a lot of money.

What if the Selangor Govt manage to enact a law requiring employers to pay at least RM1000 a month? Lets not go into the argument whether Selangor Govt CAN pass a law stipulating minimum wage of RM1000 in Selangor. They have to go through that hurdle first. What is the scope of Selangor DUN? Can they pass a law requiring minimum wage fo RM1000?

My prediction is a lot of employers would want their employees earn their RM1000. So if an employee's work is currently worth RM500 a month, the employer would make a new strategy so that the employee's work would be valued more than RM1000. 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, increase GDP and everyone would be better off in the long term.

So in the short term we would see a lot of workers lost their jobs, because Selangor employers wouldnt need as many workers. Incidentally, Selangor has the largest number of immigrant workers, legal or illegal from Indonesia, Bangladesh and India. If the enforcement is lax (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 carried out. That workers, irrespective of whether they are local or illegal/legal foreign get the same treatment, ie they get the at least minimum wage of RM1000 for 48 hour week. (or is it 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 are previously badly paid would migrate to Selangor. And with basic wage of RM1000, the hourly rate for overtime work would also be higher. Given chance to do overtime, they would bring home RM1500 or more. And the flow on effect would resonate through the economy, higher income would generate higher spending, which would also lead to higher leisure spending.

Granted, all thing being equal, higher GDP growth for Selangor. Higher income in the long run. The rural base in Selangor would benefit most. Bacause most people living in rural areas have their own land to grow some of their need, and doesnt have to pay rent, because they built their own houses. They also saves a higher proportion of their incomes.

The question is still:

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