The Star Online carried a feature; Time for minimum wage above RM2,000 and More poor kids in KL go hungry as food soars, on the calls by a PH MP and Youth group last year for the minimum wage of RM2,000. [The articles will be reproduced at the end of this posting].
The complain on the low salary and wages especially for the lower income have been getting much louder as government announced the withdrawal of fuel subsidy will commenced soon.
Economics Minister Rafizi Ramli announced progressive wage plan for private sector salary revision last year, but the pilot program will only take off in June. It leads to the question of should the fuel subsidy be withdrawn after salary adjustment made first or as the case will be, withdraw followed by the adjustment.
God knows when the full implementation of progressive wage, if it ever is to be implemented. For the private sector, salary adjustment will inextricably be linked to productivity and company's financial performance.
In the meanwhile, Prime Minister Anwar Ibrahim have committed to comment in last year's budget presentation that the civil service is long overdue for a salary revision. On labour day, he announced a 13% and some say up to 15% salary revision.
Subsequently, he was reported saying it is not automatic for the slow and lazy officers. It may annoy the civil servants and viewed as Anwar doing a U-turn, however those from the private sector long expected some kind of a merit assessment scheme for any civil servants pay raise.
Everything in Malaysia is politicise and naturally, his recent announcement was politicised too. Pro-DAP and growing critical of Anwar, Twitter Finance had their own political interpretation:
In a desperate effort to buy votes, especially from fellow Malay Muslims of whom 80% did not vote for Anwar Ibrahim in the last November 2022 General Election, the Malaysian Prime Minister announced a record hike in civil servants’ salary of more than 13%. He bragged on Labour Day that the RM10 billion allocations is the “best pay increase in history”.
Effective December this year, the salary hike means civil servants earning a minimum income of RM1,795 will get a boost to RM2,000 per month. Besides self-praising, Mr Anwar, who is also finance minister, hopes that the pay increase announcement would not only increase his plunging popularity, but would also fix pressure on household budgets due to depreciation of the Ringgit.
Having lost almost 4% of its value against the US dollar so far this year, Anwar-led Unity Government has been using foreign reserves to support the Ringgit ever since the currency dropped to 4.7965 against the greenback in February – a 26-year low since the 1997-98 Asian Financial Crisis. Unable to fix the stubbornly weak currency, he decided to hike salary instead to offset the problem.
Refused to admit his incompetence, the prime minister was in denial when he described the Ringgit’s plunge as “under control” despite the fact that it was the worst currency in Asia last year after the Japanese Yen. Over the first three quarters of 2023, the trade balance declined by 20.5% year-on-year. In spite of cheap Ringgit, exports suffered an even harder decline than imports.
The pay hike for the 1.71-million bloated civil servants – 90% of whom are Bumiputeras or Malays – will cost the government some RM10 billion annually in taxpayers’ money. Even before the increase, the emoluments are estimated to be RM95.64 billion this year – equivalent to 31.5% of the government’s total operating expenditure (OPEX). And we have not even talked about RM1.5 trillion in national debts.
Crucially, just to be popular, Anwar is putting a heavier pension burden on the government with the civil servants’ pay hikes. Did he realise that the new emoluments – RM105.64 billion – will push up the total public expenditure to almost 27% of the RM393.8 billion allocated for the Budget 2024? Perhaps he should explain whether we should worry about the RM1.5 trillion national debts.
To bulldoze the pay hike, he argues that the civil servants have sacrificed tremendously, especially the police, army, fire-fighters, anti-corruption agency, customs and whatnot. He has even challenged lawmakers to block his proposal. While MPs would not dare reject for fear of losing future elections, PM Anwar’s proposal was not only irresponsible, but was ill-conceived.
Every Tom, Dick and Harry knows that not every civil servant deserves a salary adjustment. For example, the police and customs – arguably two of the most corrupted institutions – generally do not need the pay hike. They have a very well established profit-making business within their “organization” to ensure dirty money is distributed, from lowest ranking officers to the top minister.
Read on here.
At a time Anwar is repeatedly talking about national debt, rising cost of living, and pulling back on subsidy, he is increasing the government's operating expenses claimed Finance Twitter.
It is indicative DAP have not wavered from their position when running the Ministry of Finance under the Mahathir-led PH 1.0 government to slash government operating expenditure and downsizing the civil service.
Its a long PH reform agenda that Anwar do not see the political expediency to do so yet. There are also the union activists within PKR and DAP to contend with.
Rising salary and wages including raising the minimum wage will trigger increase in consumer prices and leads to inflation which usually negate the revision in salary and wages.
There is also the concern that it could worsen to a wage-price spiral effect. According to Investopaedia, "the wage-price spiral is a macroeconomic theory explaining the cause-and-effect relationship between rising wages and prices, or inflation.
"As rising wages increase disposable income, demand for goods rises, triggering prices for goods to move higher. Rising prices then increase demand for higher wages, which leads to higher production costs and further upward pressure on prices, creating a conceptual spiral."
As it is, Malaysian businessmen are closing up businesses and factories to move abroad for the more attractive tax incentives offered by the likes of Indonesia and Vietnam. Their common complain was the RM1,500 minimum wage in which it was structured by then Human Resource Minister Saravanan for the plantation industry.
The working hours requirement is too restrictive for factories and services despite them willing to pay beyond minimum wage and overtime. At RM1,200, businessmen are leaving, what then will it be for RM2,000 minimum wage?
Could businesses achieve the revenue to sustain a 25% increase in the main item in their business cost; namely salary and wages under the current challenging global economy?
The economics is challenging but the social reasons seemed justified.
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The two Thursday May 9th Star Online articles below:
Time for minimum wage above RM2,000
By ARFA YUNUS
PETALING JAYA: The minimum wage for Malaysians should be set at RM2,102 as the current RM1,500 is too low for workers to sustain themselves and their families with, according to the latest report by United Nations Children’s Fund (Unicef) Malaysia.
The UN-backed study said its proposal for the new minimum wage was made in light of several current factors, including the high cost of living that is causing many Malaysians to struggle to make ends meet.
“The current level of minimum wage is too low and insufficient for workers.
“Taking into consideration key factors such as cost of living, poverty line income, median wage and productivity, our calculation shows that the minimum wage should be set at RM2,102 per month instead of RM1,500 currently.
“This revised new minimum wage is slightly lower than the living wage of RM2,700 as proposed by the Central Bank of Malaysia,” read the report that was published yesterday.
The study titled Living on the Edge: Longitudinal Study on Post-Covid-19 Impact Assessment Among Low-Income Households in Kuala Lumpur was conducted on 755 households living in 16 low-income flats in the city from Oct 10 to Nov 16 last year. The households had been part of a series of earlier studies in May 2020, September 2020, December 2020 and March 2021, which tracked the impact of the Covid-19 pandemic and its lockdowns on low-income families.
STAR PICK: Steering Malaysia's workforce for a sustainable future
Among the key findings revealed in the report was that although families have recovered in terms of employment and income after the pandemic, poverty persisted with 41% experiencing absolute poverty and 17% facing hardcore poverty.
Hardcore poor refers to households with a monthly income of less than RM1,169, while those in absolute poverty have an income of less than RM2,208.
“This is especially prevalent among female-headed households and households headed by people with disabilities.
“Increasing living costs have exacerbated hardships, with eight out of 10 families struggling to meet basic needs, resulting in extreme choices such as reducing food intake.”
According to the report, one in three heads of households believe that their financial situation would continue to deteriorate as compared to one in four in 2021.
As of October 2023, 30% of the respondents said they believed their financial situation would worsen. 16% said it would stay the same, 31% were unsure and only 24% believed their situation would improve.
Out of the total households surveyed, 46% said their current financial situation was worse than last year, 38% felt it was the same as before and only 16% said things have improved for them this year.
The study, funded by Unicef and the UN Population Fund, revealed that 93% of the total households they spoke to admitted that they were currently affected by the high cost of living. Only 7% said they were not.
With that in mind, the report said it was essential for workers’ social protection to be improved, especially for those working in informal sectors and were not protected by the Employees Provident Fund (EPF) and Social Security Organisation (Socso).
About 40% of workers, according to the report, did not have employment-based social protection.
“As for those who are self-employed, 92% are without such protection, mostly women.
“This lack of social protection exposes them to heightened vulnerability during economic shocks, making it more challenging to withstand financial hardship.
“It must be mandatory for all workers to be covered by EPF and Socso to protect them against injury, unemployment and inadequate or no income during old age.”
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More poor kids in KL go hungry as food prices soar
By SHERIDAN MAHAVERA and RAGANANTHINI VETHASALAM
PETALING JAYA: Rising food prices have left children from low-income families in Kuala Lumpur with fewer than three meals a day, as families try to cut back on spending due to the escalating cost of living.
The rise in living costs and financial constraints have also forced many such breadwinners (nearly 40%) to work longer hours and even cut back on food consumption and spending on non-food items, according to a United Nations-backed study on 755 households in 16 low-income flats in Kuala Lumpur.
About 52% of the children surveyed ate fewer than three meals a day, compared with 45% before the Covid-19 pandemic.
“Children are disproportionately affected by the prevailing circumstances, with a significant portion of them enduring food insecurity, a situation that has intensified since the pandemic,” the Living on the Edge: Longitudinal Study on Post-Covid-19 Impact Assessment Among Low-Income Households in Kuala Lumpur report found.
This nutritional deficit extends to children in female-headed households and those in households led by persons with disabilities, highlighting the universality of the challenge, it added.
Malaysia announced it had entered a Transition to Endemic Phase on April 1, 2022, although the Covid-19 pandemic has not been officially declared over.
The UN study aimed to find out how these families, whose median incomes are near RM3,000 per month, are coping with the rise in food prices and other living costs since the pandemic.
“Children, most of whom have health problems, also eat less with one out of every two eating less than three times a day,” the study said.
The households have been part of a series of earlier studies in May 2020, September 2020, December 2020 and March 2021, which tracked the impact of the Covid-19 pandemic and its lockdowns on low-income families.
Eight out of 10 households said they are struggling to earn enough to meet their daily needs, as compared to the pandemic era when seven out of 10 reported experiencing this hardship.
“The majority of households (90%) say they are affected by the rise in the cost of living, especially food prices, with about 50% saying that they are financially worse off than in 2022.”
Six in 10 households, including those headed by women and persons with disabilities, cited high prices as a major obstacle hindering their ability to offer nutritious meals to their children.
Two in 10 respondents cited time constraints and the affordability of fast food as further obstacles for families in providing nutritious meals to their children.
“Dietary habits have undergone notable changes, characterised by increased consumption of eggs, rice, and instant noodles.
“Approximately seven in 10 households now report spending more on eggs – the most affordable protein source – compared with 52% during the pandemic.
“Similarly, seven in 10 households also indicated increased spending on rice compared with the four in 10 during the same period,” it said.
The consumption of unhealthy food options also rose, with 46% turning to instant noodles compared with 40% during the pandemic.
The financial pinch has taken a toll on their mental health, with three in four households admitting that the rising cost of living had affected them mentally.
“Depression rates have worsened. The proportion of households reporting feelings of depression increased from 21% in September 2020 to 28% in October 2023.
“This trend remains consistent for female-headed households, with rates hovering around 28% to 29% during this period, although there was a notable increase from 22% in March 2021,” the report said.
The report also provided six key suggestions as a mitigation measure.
These include care allowance for all children from before birth until the age of two, allowance for the disabled, more social aid and increasing awareness on sexual, reproductive and mental health.
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What will the young and popular new Human Resource Minister, Steven Simm come up with for the increasingly under pressure Anwar and Rafizi?
Governing isn't easy. The theory is one but the bigger challenge is in solving problems. There is always the difficult balancing act between conflicting interest.
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