Khairy says min wage “a moral obligation”

By Anil Netto,

Along with Nazri’s straight talking to Utusan comes another pleasant surprise: Khairy Jamaluddin has called on the government to implement a minimum wage.

Image via Wikipedia

In an opinion piece in The Edge (20 September), the Umno Youth leader said a minimum wage has become a moral obligation that the government must fulfil immediately.

Khairy rightly pointed out that a third of the workers in the country earn less than RM700 a month – which is below the poverty line. And the average annual increase in wages was only 2.6 per cent over the last decade – below the global average of 3.2 per cent.

He pointed out the starting pay in some industrial estates in Selangor is as low as RM450; in Kedah and Johor, workers in some large firms may earn only RM380 while applicants with technical certs could start with just RM540. At this rate, how are we going to become a high-income nation as envisaged under the New Economic Model, he wondered.

Khairy even said the RM900 proposed by the MTUC may not be enough especially if the worker is the sole breadwinner in a family with multiple children and living in an urban area.  “If we want to continue to be a sweatshop, by all means resist a minimum wage. But if we strive for higher value in our economy and higher incomes for workers, we need to be bold enough to institute structural changes and attract the right kind of investments.”

He said the minimum wage was one of the recommendations of the recent BN Youth Lab report submitted to the PM on issues that mattered to young people. “For hundreds and thousands of workers in Malaysia, the market and its attendant dogma have failed them.”

Yes, it’s about time we introduced a minimum wage. Even the Federation of Malaysian Manufacturers (FMM) has come around to accepting the idea of a minimum wage, but they want it set as RM700, as reported in The Star. Huh? Below the poverty line? Typical.

Actually, as Khairy and others have pointed out, even RM900 is too low. In fact, the RM900 figure is actually a dozen years out of date. The figure RM900 was mentioned when the Malaysian Trades Union Congress (MTUC) proposed a minimum wage to Mahathir during a meeting in the late 1990s. To the unionists’ surprise, Mahathir even suggested that RM900 was not enough and suggested RM1,200. Veteran unionist K George, writing for Aliran Monthly, explains:

The RM900 figure
The sum of RM 900 as minimum wage was proposed in August 1998 when Mahathir met the MTUC leaders at the meeting called for by him.  At that meeting, Mahathir surprisingly maintained that RM900 was not enough for an average family of five persons to survive for a month.  Instead, he proposed that the minimum wage should be RM1,200. His excuse for not implementing his proposal of RM1,200 immediately was the financial crisis at that time in Malaysia.  But when the economy started to improve gradually, Mahathir left the scene in October 2003 without resolving the minimum wage issue.
In the meantime, a few months after the August 1998 meeting with Mahathir, the then president of the MTUC, Zainal Rampak was offered a  senatorship…
I asked the MTUC as to why they stuck to RM900 and did not take up the suggestion of Mahathir which was RM1,200.  The answer was straightforward and convincing: “It is the first claim submitted to the government after Abdullah became the Prime Minister.”
Unscrupulous employers not happy
I understand from reliable sources that the majority of employers do not want a Minimum Wage Act enacted not because the proposed RM900 is too high a wage.  Then, what could be the reason?
Well, all private sector employees are entitled under the law to EPF contributions from their employers at the rate of 12 per cent of their basic salary  while the employees themselves contribute another  11 per cent of their basic salary. Both contributions must be sent to the Employment Provident Fund office monthly. This is a form of retirement benefit fund to enable workers to retire with reasonable savings to carry on with their life with peace of mind.  For example if your basic salary is RM1,000 a month, the employer must contribute 12 per cent, which is RM 120, and the workers should contribute 11 per cent, which is RM110, from their salary, making a total of RM 230 savings a month (plus interest)….
… Some unscrupulous employers will cheat the workers by preparing a pay slip stating that the basic salary is RM300 for example and the remaining amount of RM700 will be listed as allowances for overtime, transport and for working on weekends and public holidays etc. Thus the EPF contribution by the employer is based on RM300 rather than on the actual pay of RM1,000.  As a result, the employers’ contribution is drastically reduced to RM36 instead of RM120 and the workers contribution is reduced to RM33 instead of RM110.  In other words, the workers lose out RM84 per month in the savings account for their old age.  Of course, the employees concerned could report this matter but they would not because they would be afraid of losing their jobs as a consequence of their action. If there was a minimum basic wage, the employer cannot play with the figures but will be forced to  calculate not only the EPF contribution but also any payment for overtime and for working on weekends and public holidays based on actual salary.
Finally, a minimum wage law is usually applicable nationwide, not based on industries or on the cost of living in certain states or regions.  Such problems could be taken care of by introducing special allowances and/or other facilities on a temporary basis.