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Avoid The Dilemma Of A High-Income Nation Earning Low Wages‬
Malaysia Perspective | 01 October 2010

By Yang Ming Wan

A year has passed and gone since Prime Minister Najib Razak trumpeted his ‘vision of a high-income nation’; to be exact, 16 months have transpired since he unveiled this lofty vision on Labour Day (1 May) last year.

These 16 months have thrown up its fair share of nasty surprises. Though the Government has stayed true to its course, the people are however more worried than hopeful: that we should count ourselves fortunate if we have not by now turned into a high-expense nation.

The official definition of a ‘high-income country’ according to our Government is to double our per capita income to US$15,340, based on our gross domestic production. Various high-ranking government officials have stepped forward and drummed up this target as one that Malaysia is capable of achieving.

The Minister responsible for the Economic Planning Unit in the Prime Minister’s Department, Tan Sri Nor Mohamed, pointed out that within a six-year period from 2002 to 2008, Malaysia’s per capita income had indeed doubled from US$3,843 to US$7,734. Accordingly, it would not be difficult to double our current per capita income level in 10 years’ time.

High Income Does Not Necessarily Translate To High Pay
Apparently, Nor Mohamed’s definition of a high-income country is delineated solely on per capita income, which is effectively our gross domestic production, while ignoring the actual salary income. Human Resource Minister Datuk Subramaniam revealed last week that over the last 15 years, pay adjustments in Malaysia’s private sector only amounted to 2.6%, far outstripped by the 15% jump in the cost of living, with no hope of catching up with the sharp 65% increase in the per capita income.

Our per capita income has already risen sharply from US$4,016 in 1995 to US$6,634 last year. Were it not for the financial tsunami last year, Malaysia’s per capita income may have exceeded US$8,000, or even doubled the 1995 figure, because our per capita income two years back was already US$7,737, which unfortunately retreated slightly last year with the economic downturn.

Crises notwithstanding, the growth figures ultimately revealed that our salaries are lagging far behind our per capita income.

Under the New Economic Model, this formula remains unchanged. Executive Director of the Malaysian Employers’ Federation, Samsudin Baradan, had stated clearly that the Federation will fully support the New Economic Model proposed by the Prime Minister; however, he also stressed that ‘high-income country’ does not mean ‘high salary’ as they are totally different matters.

Cartel-Like Modus Operandi Puts Pressure On Salaries
The Employers’ Federation felt that salaries must be decided by market forces while ensuring that the workers’ productivity and performance are upgraded. In addition to upgrading the workers’ skills and adopting a certification system, the Government should also review the Labour Law to allow employers to manage their staff with more flexibility, while ensuring that workers must be competent with diverse skills and qualify for multiple job roles.

What this series of demands from the Employers’ Federation is really saying is that workers should sacrifice their basic rights which they enjoy under the current labour law, while taking on more responsibilities but not asking for higher remuneration.

If wages were to be decided by market forces, as the employers waxed lyrical about, employees would stand at a disadvantage. Once employers gang together to operate in a cartel-like manner, wages will be depressed artificially and standardised across industries, while the inherent flexibility offered by labour supply and demand will cease to exist. Eventually, the workers’ rights are sacrificed so that employers can achieve their target of high efficiency and high profit at a low cost. Revenue has increased, but the employees’ wages stagnated.

Polarisation Of Wealth — The Bane Of An Economy
The Employers’ Federation’s interpretation of the notion of a ‘high income nation’ seems dubious at best. The four main points of the concept of a high income nation, according to Prime Minister Najib when he introduced it last year, are: 1) embrace changes that allows a sustainable rise in workers’ wages, 2) raise productivity so wages and income may rise in tandem, 3) upgrade skills through innovation and creativity, thereby raising productivity, 4) increase productivity and competitiveness by abandoning the stance of profit over workers’ skills upgrade.

If employers are only concerned about costs, but demand employees to work harder for higher profits while keeping wages low, our country will then fall into the dilemma of a ‘high income country’ that is grappling with a widening wealth disparity, where rich employers get richer while the struggling employees become poorer.

The Government will need to take heed and head off the tragedy of becoming an economy saddled with a wide income disparity.

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