Minimum wage, maximum delay

Effective July 1, the monthly minimum wage will increase from RM800 to RM920 in Sabah, Sarawak and Labuan. This is a welcome announcement for the lower income groups especially with the rising cost of living. –filepic

Effective July 1, the monthly minimum wage will increase from RM800 to RM920 in Sabah, Sarawak and Labuan. This is a welcome announcement for the lower income groups especially with the rising cost of living. –filepic

FINALLY the new Minimum Wages Order 2016 has been gazetted. Under the new order, effective July 1, 2016, the monthly minimum wage will increase from RM900 to RM1,000 for peninsular Malaysia and from RM800 to RM920 for Sabah, Sarawak and Labuan.

It is long overdue. Under the minimum wage legislation, the minimum wages shall be reviewed every two years.

The first Minimum Wages Order 2012 was gazetted on July 16, 2012 to be effective from Jan 1, 2013 for employers with six employees and above and for employers with five employees and fewer, to be effective from July 1, 2013.

Deferments were given to specific organisations and individual companies to give breathing space to certain employers who needed some time to revisit their business model and wage structure.

The last deferment expired on Dec 31, 2013, so all employers in Malaysia must fully comply with the Minimum Wages Order from Jan 1, 2014.

That being so, the new rates should be effective from Jan 1, 2016 not July 2016. One can even argue that the review must be effective two years from Jan 1, 2013, meaning Jan 1, 2015. In essence, the delay is as long as 18 months.

While a review does not necessarily mean an increase, the law stipulates that there must be a review every two years.

The minimum wage review is supposed to be done in a holistic manner, taking into account factors that are already built into the formula used for the calculation.

The review was first done by a technical committee appointed by the National Wages Consultative Council (NWCC) and then thoroughly deliberated by members of the NWCC who comprise representatives from Government, employees, employers and technical experts.

The NWCC submitted its recommendations many moons ago. While the Cabinet has the final say, the Government should only depart from the recommendations if it has very strong grounds and that there are exceptional circumstances to warrant such departure.

Minimum wage review should be a transparent social economic decision, not a political tool.

This gives rise to a serious issue in that the review was based on economic and labour market data taken over a two-year span.

Since the review was delayed for 18 months, the calculations are skewed and not reflective of current labour market conditions.

This would mean that the next review may have to compensate for this delay and would likely mean a much higher increase.

Employers may be patting themselves on the back for convincing the Government to delay the review. But don’t be penny wise, pound foolish. They should not cut off their noses to spite their faces.

For Sarawak, workers are aggrieved that the minimum wage is lower than in the peninsula despite the fact that the cost of living is higher and the state government has autonomy over labour matters.

Unfortunately, the powerful employers in Sarawak have been paying lower wages and as a result, the minimum wage is lower as current wages are a factor in the calculations.

Make no mistake about it, wages have lagged behind productivity growth the past two decades due to powerful employers and foreign workers.

The minimum wage policy is important for employees as it helps to ensure wage increases are in line with the cost of living, thereby enabling employees to afford basic necessities.

For the employers, this policy should encourage them to invest in higher technology by moving up the value chain and in the long run reduce dependency on foreign employees.

We can already see this in coffee shops and food courts, where businesses have used iPads and other tablets to take orders, which are instantly transmitted to the kitchen, reducing the number of workers. Isn’t that a good thing?

For the country, the minimum wage is expected to facilitate the transformation of the economy from a labour-intensive to a capital-intensive economy through automation and mechanisation and help the nation to become a high-income economy by 2020.

Minimum wage policy should also benefit the economy in the long run with the likely improvement in the purchasing power of the working class.

Like clockwork, employers especially SMEs will whine that they cannot afford it. These are the same group of cohorts who claimed that if Malaysia implements minimum wages, 600,000 employers will go bankrupt.

Well, it has been four years and they are still whining.

It is about time that instead of whining they develop their business models to create high-value jobs.

They have to reinvent, be more competitive, be creative, add value and improve the end product to be world class.

Again, if employers cannot afford a minimum wage that is lower than the poverty line index, then they have no business to be in business.

Tomorrow is polling day for the 11th Sarawak election.

With all the promises for development, grants and projects being doled out during the campaign, I wish we have an election every year.

So do go out and vote, and vote wisely and sincerely for a better future.