Monday, May 10, 2010

MINIMUM WAGE for Malaysian workers

I find it timely that Dr Chua Soi Lek ( ) had strongly advocate on May 1 about having a minimum wage policy for Malaysian workers.

I'd been in the manufacturing sector for the past 30+ years and had seen the decline of local labor and the increasing  growth of foreign workers. In my last industry the foreign workers takes up to 70 % of the manual labor workforce. The argument that locals are not interested because of the low wages is true. Our industry pays an average RM 15 to RM17/day for manual labor - a rate that is definitely unattractive to the local worker. Add in overtime of  2 hours/day and 2 alternate Sunday work plus incentives less EPF, Sosco etc take home pay ranges from RM 700 to RM 900. This is just worker wages costs - most employers will also incurred additional costs in  hostel , transport , levy , flight tickets, food allowances, medical for these foreign workers adding in another RM150 to RM250 per worker.

Besides costs, employers also faced issues of greater cases in work stoppages, sometimes small strikes even in the absence of local unions. The bonding among foreign workers is exceptionally strong especially on issues of compensation, accommodation and facilities provided in hostels.

Most foreign workers  recruited are mainly unskilled or at best semi-skilled. Employers had to spend time and money to train them for each specific skill. The training period could range from 1 month to 3 months and it is a period of costs subsidy with minimal contribution to the bottom-line. Employers will also have to bear with retraining costs being incurred again when these trained workers return home after their contract expired.

Some employers had reportedly claim that they too need to pay additional unofficial special service charges to the recruiting agents who claimed is for certain Ministry to gain approval . This is however an unproven claim and is a claim that cannot be easily proven even in the courts.

Most foreign workers sent 20% to  30 % of their income back to their families. This is not a small amount considering there are reportedly about 2 million foreign workers in the country. The actual figure is actually higher as  illegal recruited workers is unaccounted for. These money if paid to our local workers would have a significant contribution to the local economy.

It will not be easy to formalize a minimum wage policy. Just look at last week retract by the Human Resource Minister about minimum wage for security personnel. Suddenly their employers said is not practical and is a burden increasing their costs and reasoning their customers will be unwilling to pay for the higher charges to cover the increased wage costs. So it is now back to square one. The HR Minister final comments was meaningless as he said  a " more detailed  study based on various aspects was needed as it had vast implications " - this so called further study is again another example of bureaucracy foot-dragging .  So wasn't any study done before they announced the minimum wage scale for the security personnel ??

We hope Dr Chua's labor day message could reignite the steps to setup such a minimum wage policy .

Below is the full text of Dr Chua's message:

This Labour Day, MCA pays tribute to all workers who in one way or another have contributed towards the nation’s economic growth.
At the same time, we reiterate our call for the establishment of a Minimum Wage Council which would look into gradual implementation of minimum wages according to industries. Minimum wages will ensure that all Malaysians will enjoy a decent standard of living, thus enabling Malaysians to budget steadily and regularly for the family’s monthly expenditure.
Implementation of a minimum wage policy revolves around its effect on employment, productivity, inflation and the country’s competitiveness. It will galvanise changes in the economic model.
The concerns that deployment of minimum wage would make Malaysia a more costly place to do business thereby resulting in a drop in foreign investment is only valid if a blanket country-wide minimum wage is enforced irrespective of sector. However, this concern can be overcome if minimum wage is introduced in high growth sector especially those heavily dependent on foreign workers. This should be accompanied by the government providing incentive like grants or loans to encourage industries to invest, to embark on capital expenditure and training to increase productivity.
Minimum wage should not only be viewed as being aimed at improving the standard of living of workers but also as the driver of productivity and innovation. With a reasonable income, productivity will increase as workers will have a better attitude towards work as their income enables them to sustain their living. A change in attitude by the workers coupled with training and technological investment, will help Malaysia gradually wean off its addiction to cheap and low skilled foreign labour to drive its economy.
To cite an example, the oil palm industry faces shortage of workers which results in employers relying on foreign labour. However, if more research and development are intensified to come out with efficient mechanical harvesters for the industry, this will ensure higher outputs and reduction of foreign labour.Some trial results have shown that with mechanization using the motorized harvesting pole, the workforce for harvesting could be reduced by half, land-to-labour ratio could be doubled, productivity tripled and the harvesting cost cut by 75%. However there is reluctance in heavily investing in R&D to improve and make the machine afforadable as it will be easier to engage foreign workers.
The unemployment rate of Malaysians will be lowered as minimum wage will attract the locals to participate in the labour market and with the reduction of foreign workers it will help reduce the financial remittance overseas by foreign workers that has increased to RM18 billion.
While the private sector may see diminished profits initially when minimum wage is implemented, through innovation and higher productivity, there will be more returns in the long run. It is MCA’s hope that the government will seriously look into setting up a Minimum Wage Council for the progress of the nation and its people.
Datuk Seri Dr Chua Soi Lek
MCA President

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