Govt must realise that wages have increased in nations where unions are effective

THE 11th Malaysia Plan (11MP) was tabled in Parliament last week to help Malaysians prepare for developed nation status by 2020.

This is our last chance saloon before Malaysia supposedly reaches so-called “developed” status.

Overall, it is a comprehensive plan that seems to encompass all areas. I also quite like the theme “Anchoring Growth on People”. Let’s hope it is not rhetoric.

One of the four strategies to boost economic fundamentals is unlocking the potential of productivity to ensure sustainable and inclusive growth. This will be underpinned by significant increases in productivity, with less dependence on inputs from capital and labour. Contribution of multi-factor productivity to GDP growth is targeted to increase to 40%, while that of capital is expected to reduce to 44% and labour to 16%.

Labour productivity is set to increase from RM77,100 in 2015 to RM92,300 in 2020 while share of compensation of employees to GDP will increase from 34.9% in 2015 to at least 40% in 2020.

The concern as usual is in the implementation. Experience has taught is that all too often, implementation is hijacked by vested interests, lack of transparency, governance issues and political expediency. There is always a mismatch between implementation and policy, between action and vision.

To achieve this productivity leap, the Government will put in place a nationwide productivity agenda and implementation plan with a five-year Malaysia Productivity Blueprint.

At the industry level, the blueprint will emphasise productivity across industries and also draw up industry-level productivity programmes.

At the enterprise level, there will be productivity assessments and targets. This will be achieved by promoting productivity performance targets, introducing firm-level interventions, promoting health-check mechanisms and fostering a productivity-based culture.

Higher productivity growth will be achieved through comprehensive initiatives at all levels and championed by industry players.

To raise industrial productivity, there will be greater adoption of automation and upgrading of skills. The innovation ecosystem will be enhanced to elevate productivity through new or improved processes and technologies.

However, I am concerned that the plan does not seem to put in place strategies to really enable us to take that quantum leap towards higher productivity, especially in the private sector.

Productivity is not about hiring more low-paid foreign workers, but investment in innovation and technology. However, firms will only adopt new technologies if they are more cost-effective. No firm will invest in new technologies if it can still rely on millions of workers, local or foreign, on low wages who are easily exploited, including illegal ones.

Wages will remain low if workers are left on their own and to market forces which heavily tilt bargaining power to employers. Millions of foreign workers can simply cross the border with impunity. This was the evidence in the past 50 years. We must move away from this model and we must move fast.

To do that we must urgently put in place concrete actions to reduce foreign workers.

We must also develop trade union capacity. Some unions may be disruptive, but with proper training, empowerment and capacity-building, unions can be a useful agent for productivity improvement, as evidenced in Singapore, South Korea and the countries that have leapfrogged us to developed status.

As recent worker activism in China has shown, stifling trade union laws does not stop worker activitism and unrest.

The Communist Party fears an independent labour movement and only allows one government-linked trade union federation – which claimed 290 million members at the end of 2013 – which tends to side with employers.

Despite this, there were 1,379 protests by workers in China last year, more than tripling in just three years. That included China’s biggest strike in decades, when tens of thousands of employees at Yue Yuen, a Guangdong factory that makes shoes for Nike and Adidas, won concessions despite worker arrests.

Once renowned for their cheap wages and docility, employees in the workshop of the world are increasingly standing up for greater benefits.

In the face of rising inequality, China’s government over the last decade passed landmark laws establishing employee rights including social insurance payments from employers and compensation when factories relocate.

Low-cost labour has been key to China’s decades-long economic boom but the authorities have conceded that this model is not sustainable anymore.

So to achieve the 11MP’s crucial strategy, the Government must recognise that in countries where unions are strong, effective, representative and independent, real wages have increased. The industry or enterprise that they exist in have flourished, where profitability and productivity are among the highest. The most competitiveness and high-income countries have high union density.

We must strengthen the trade union movement by adopting a more liberal approach to trade union registration, recognition and representation if we are to achieve our dream of a high-income nation for everyone.

This is all the more pertinent as I wish my Dayak friends and relatives Selamat Hari Gawai. The Dayaks are amongst the most hardworking employees, forming the backbone of the construction, timber and plantation industries, yet their share of the economic pie is pitifully small.

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11th malaysia plan , sarawak , wages


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