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Malaysia Weighs Minimum Wage Policy

Baradan Kuppusamy

KUALA LUMPUR, Mar 25 2012 (IPS) - Malaysia plans to introduce a national minimum wage for its workers against stiff opposition from employers and manufacturers who warn that such a policy would shut down nearly 200,000 small and medium enterprise (SME) units.

Human resources minister Subramaniam Sinnapan has dismissed the manufacturers’ claims as “false and alarmist,” but Prime Minister Najib Razak appears rattled and has delayed an announcement until May 1.

“I will study the matter in-depth and make an appropriate announcement on Labour Day,” he was reported as saying by the ‘The Star’ daily on Mar. 20.

The government is caught between having to shore up votes in an election year and meeting the demands of manufacturers.

Najib cannot ignore warnings by Malaysia’s Employers Federation that the closure of 200,000 SME units would mean the loss of four million jobs in a population of over 28 million people.

Adding to the pressure, the opposition-ruled state of Selangor declared a Malaysian ringitt 1,500 (487 dollars) minimum wage for its employees, starting Jan.1.

But, Selangor has had to set aside 97.5 million dollars to assist state-owned companies that are unable to pay the new wages.

“Four million of them earn less than 162.5 dollars a month,” said Arulchelvam Sinnaiyan, secretary-general of the Parti Sosialis Malaysia, a small but vocal party that has two lawmakers in parliament.

According to a UNDP country report, Malaysia is one country in Asia that has a wide income gap, with the top 20 percent people enjoying 70 percent of the wages and the bottom 60 percent earning 20 percent.

A middle class of 20 percent struggles to pay off loans on houses, cars and credit cards.

In the 2008 general elections, the bottom 60 percent of voters, many of them SME workers, rebelled, choosing the opposition Pakatan Rakyat over the ruling National Front (NF) in the biggest upset since independence from Britain in 1957.

The ruling NF government wants to fix minimum monthly wages at 292. 60 dollars for SME workers, but manufacturers say they are already struggling to stay afloat on a profit margin of three to six percent and will lose out to competitors in Asia, especially China and India.

The country is trapped in a low-cost economy and has to move out to higher skills and higher cost manufacturing as neighbouring Singapore did in the past two decades.

But the biggest hurdle is the upcoming general election whose outcome can go either way. While Najib is popular, he has a lot of baggage carrying the NF, especially corruption issues.

In the latest of a series of scams, a minister was forced to resign after her family diverted funds meant to make the country self-sufficient in beef production into buying plush condominiums and expensive cars.

Najib sees the four million SME workers as potential voters, many of whom are struggling on wages that are way below the official poverty line of 247 dollars a month.

“A minimum wage of 293 dollars is great news and shows how desperate they are to win. It shows the power of our votes,” said factory worker Muniandy Ramasamy, 42, of Kajang, a city about 30 km south of the capital Kuala Lumpur.

“I can now take home a decent wage with that,” he said, adding that while his basic pay is low, he earns more by working overtime.

He also gets other incentives to take home 390 dollars, barely living wages in Malaysia.

Najib has been giving ‘One Malaysia’ aid to low-income families totalling nearly 650,300,764 dollars and has promised more doles if the economy improves.

“Giving minimum wages is a smart move considering the opposition from employers…it forestalls potential protests and wins him votes in the crucial election,” says Denison Jayasooria, head of the Social Strategic Foundation, a government-funded entity.

“Employers have said before that they would rather die than agree to a minimum wage policy, but Najib has to win them over,” he told IPS.

Jayasooria said having a minimum wage policy would also help lift the economy out of a low-cost morass.

Many of Malaysia’s neighbours have minimum wage packages and use them as a social safety net to help lowly paid workers manage in tough times.

These countries, including Thailand and Indonesia, plan to raise wage levels to counter the widening income gaps and prevent possible political upheavals.

Labour advocates are already calling for minimum wage deals in Cambodia, Sri Lanka and Bangladesh.

China, the world’s manufacturing hub, is raising its minimum wage by 13 percent in stages over the next five years.

A minimum wage policy is one of Najib’s most important reform planks. He needs to convince SME workers that the government stands for them and not just for the rich, powerful and well connected.

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