Tuesday, September 7, 2010

Mimimum Wages ---- Part 1

(AsiaOne) SHAH ALAM - Malaysia will have a minimum wage model that is tailored to fit the country's economic situation and the needs of its working force. Human Resources Minister Datuk Dr S. Subramaniam said the model, which would be tabled at the cabinet in October, would be unique and unlike other countries', although he said it might not include all sectors.

He said data collection had been conducted and the ministry would meet representatives from each sector to discuss the minimum wage model before preparing a cabinet paper.

"We have organised a seminar to get feedback and input from various sectors. Once we have collected sufficient information, I will prepare a paper to ask the cabinet on the direction to go, be it national, sectoral or regional.


Before I am giving my views whether we should implement minimum wage or not, take a look at this table first(employment by sector).

60% of working adults are being employed in the manufacturing(28%), so called others(utilities, wholesale, retail trade, accommodation, restaurant)(29%) and agriculture(12%). Government makes up another 12% of it.

Before I make further comments, there are a few arguments need to be put aside.

First let's get rid of emotional argument that big businesses are making billion or million of ringgit profits while a poor sales girl in department store is making 600/month can't make all the ends and the like, so why can't you pay her a bit more?

Second, get rid of opportunistic politician stupid argument that we ought to implement minimum wage so that we can be a high income nation.

Third, Mee too argument, many countries like Thailand or Philippines are also implementing minimum wages. So we must follow suit but where are they?

Let me start with manufacturing group first. Market driven wages followers will believe that if you can't pay a person enough, you won't be able to get a worker. Subsequently your business will collapse because nobody works for you.

If your cost is too high(set by businesses or government), you just cannot compete in the world subsequently your whole industry will be wiped out. Have you heard of hollow out story? You have heard of manufacturing sector in the United States or Britain are dead, right? Have you heard of the story of Berkshire Hathaway told by Brother Warren Buffett?

The industry will do well in countries that have the lowest cost. Whether you like it or not, the technological advantage is no longer an advantage because your competitors will catch up so fast and slashed price. How you ever pay more for LCD TV in recent days?

If you believe the Foxconn's operators in Shenzhen, China earn RM 2,000/month. Very soon Foxconn will move their bases out of China to Vietnam, inner China or Malaysia, Thailand and etc. So, the global market forces will take care of that.

Let's get real, if you believe the poor operators are earning less than RM 350, then I think you get con. Many of them can actually afford to drive cars because they have lots of overtime. Do you know how low paid workers in China survive? Basically, the employers will provide accommodation and meals and they will work lots of overtime.

Still insist minimum wage, no problem go ahead, let's say 30% of the manufacturing business gulung tikar or 1 million people go unemployed. Can you find a home for them? I think we will end up with more Mat rempits or snatch thieves on the street.

The second group of people which are more domestic consumption driven -- small businesses. If you want to raise the minimum wage of waiter to RM 1,500, then we are paying them RM 6.25 per hour. No problem, then our roti canai, teh tarik, etc will go up. If nobody wants to pay for this additional cost, many small traders will die because they can't compete with larger and more efficient operators or self-service operators. Most likely the lower income bracket people will suffer again because they don't have many choices but to continue to use their services by absorbing the cost increase. So raise the minimum wages again?

The third group, the so called the dirty and dangerous industry - agriculture. The industry that our local people will never want to work. So why bother to even talk about minimum wage?

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