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Shaheza had first started her career as a private kindergarten tutor and received only RM700 which, to date, is the lowest she has ever been paid.

“Although I was staying with my parents and my workplace was just 20 minutes away, it was still hard to sustain a living with only RM700 monthly. And the rising cost of living makes it even harder to survive,” she lamented.

Currently working as a textbook editor, she recalls when she received her first paycheck and then spending it on bills, study loans, and her family, which left her with only RM100 for her own personal use.

Citing a Merdeka Centre poll last November which showed 72 per cent of voters viewed economic issues as their foremost concern, an international news report had highlighted recently that the cost of living is expected to be a hot topic issue in the coming 14th General Election (GE14).

South China Morning Post reports that the GST has emerged as the most convenient whipping boy for cash-strapped Malaysians.

Both political parties know that tackling rising living costs will be close to the heart of voters and have chosen to address that specifically in their respective manifestoes.

While Pakatan Harapan has claimed that abolishing the Goods and Services Tax (GST) will bring down costs for the rakyat, the Barisan Nasional (BN) ruling coalition has chosen a more realistic, albeit much challenging route of actually increasing the people's income through various initiatives, among them the minimum wage.

Malaysians Recall How They Cope With Earning Low Wages

Long a contentious issue in Malaysia, any mention of minimum wage ensures an emotional response.

We spoke to other Malaysians in the same boat as Shaheza from different economic backgrounds and all of them had something to say about how the escalating cost of living affected them and what do they look forward to with this initiative.

Back in 2015, Atiqah earned a gross pay of RM2,900 which is the lowest amount this Assistant Operations Manager has ever received.

“I worked in Alor Setar but stayed in Changlun (around 35km from my home) and my monthly transportation expenses roughly sums up to RM600 which includes petrol, toll, and parking fares. This doesn’t include my meal expenses which could go up to RM20 per day.

“Although I try to cut back on my needs, it is still hard for me to allocate another RM600 for my savings as I still have utility bills and other miscellaneous payments to make each month,” expressed Atiqah.

As for the government setting a minimum wage, she opines how urban employees may experience the cost of living struggles the most.

“I have a couple of friends who works in Kuala Lumpur, both with a gross pay of RM3,900 and RM2,600 but the one with the latter pay can survive better. In the end, I believe it is based on each individual and how do they manage their finance.

“What Barisan Nasional proposes is a good initiative but I hope they would also consider resolving the different cost of living each state faces because honestly, even if I move and get a better offer that’s only RM500 more, I still won’t be able to survive,” said Atiqah.

As for Amirul, a copywriter whose first pay was RM2,000 back in 2014, he admits that he was underpaid but thankfully, he was living with his parents so it was just enough for him.

“My office was in Mont Kiara which then made it troublesome for as me as it’s hard to find cheap places to have lunch. I am no longer earning a minimum wage now, but it's still too low.

“Fresh graduates are making a minimum of RM2k for their first jobs, how are the youth supposed to save for houses? Mobile carrier plans, cars, the inevitable responsibility to support a family,” he further questions.

“It is difficult for a bachelor to tough it out, let alone a family. So it is reasonable for the government to set up a minimum wage for the citizens, but if only the prices of goods and services do not hike up. If the amount of minimum wage is increased, the prices of fuel for example, should be reasonable and this will stabilize the living standards of the citizens.

“Personally, I think the increment of minimum wage will give a big impact to our living standards, which means it will affect our physical and emotional health too. In order to provide for a better nation, citizens should have higher quality of life by providing increments to our wages at public and private sectors. Malaysia's living standards will then improve and it would create a balanced economy, environment and social sustainability,” Shaheza further relayed her concern.

Employers Depend Greatly On The Economy’s Stability – Cuepacs

The biggest group of employees under one employer in Malaysia are the civil service and low wages have been among their chief grouses.

Malaysian Digest spoke to Datuk Azih Muda, the president of Congress of Unions of Employees in the Public and Civil Services (Cuepacs) where he shares his thoughts on the ‘Dompet Rakyat’ initiative and how feasible it is for the people.

“As much as I welcome Barisan Nasional’s effort to gradually increase the minimum wage for private sectors, I hope this would be the same for the government sector.

“With regards to the cost of living, it has to be parallel with our wages. The cost of living will continue to be the main agenda as the rise in prices of goods and inflation will occur. The government is now promising 3 million jobs, and this shows how our economy is improving and we hope this will impact our society in the future by enabling the people’s purchasing power.

“Up to 80% of the people are concentrated in urban areas so this would also lead to larger developments in the urban scene, as well as, providing more job opportunities. This could then project a more stable economy and reducing the people’s financial burdens,” said the president of Cuepacs.

As to whether he foresee any problems faced by employers with this minimum wage, Datuk Azih Muda says it cannot be predicted.

For the private sector, Malaysian Employees Federation (MEF) is held responsible, whereas, for the government sector, the ruling government themselves are the employers.

“All employers greatly depend on the economy’s stability. The more stable the economy, the greater heights you can achieve for your company. Based on my observation, for the government sector, there are not many issues at stake. However, for the private sector, perhaps the higher payroll could lead to a bigger profit for the company, so the employer must be able to provide in return,” he reminds us.

As to how can we achieve this goal today, Datuk Azih says that before anything else, what the people want is also an honest and transparent government.

“We want to know the government’s expenses and our economic situation. The people are also ready to whip up a larger economy that will enter our market and through new economic models. And this can be done also through the Blue Ocean Strategy to see whether the country is always in a state of sustainability or not.

“The important thing is that the income must change. Otherwise, the cost of living will not be able to accommodate the workers in our country.

“This is a dream; this manifesto is a promising hope and this all depends on the people. Each of them had good value in their promises so judge and vote wisely,” he added.

“Implementation Of Minimum Wage Should Be A Temporary Measure To Correct Market Failure”

Another contentious issue among Malaysians in the run-up to GE14 is the issue of living wage.

According to Bank Negara Malaysia (BNM), in their annual report for 2017, they said that single citizens should be earning RM2,700 a month. Meanwhile, for a family with two children, they should be earning at least RM6,500 for a living wage.

Raising the minimum wage in phases to at least RM1,500 within five years is inter-related to getting more Malaysians into the bracket earning a decent living wage but there are many economic factors to consider.

Malaysian Digest reached out to Dr. Muhammad Irwan Ariffin from the Department of Economics International Islamic University Malaysia (IIUM) and he relays how the minimum wage is the floor price for labor services decided by the government.

It is a form of government intervention in the market whereby when the minimum wage is higher than the market determined wage, the interaction between labor demand and labor supply will lead to a low market wage. Hence, the government feels the need to intervene and put a floor wage in the market.

“Employees who are at the bottom of the workforce (with wages lower than the minimum) will be able to receive additional income when the minimum wage is enforced. The additional income would be able to improve the quality of life of these employees, translate into a more consumption spending and spur economic activities, reduce the inequality gap, and attract more labor supply whereby people who are not willing to work previously due to unattractive low wage may now be willing to join the labor force with higher min wage now.

“However, we also need to look at the impact on others. Employees with higher wage than the minimum wage may only see a small increment. Due to more people seeking employment as the minimum wage has increased, there will be a rise in unemployment.

“Higher minimum wage translates into higher cost to hire workers from a firm’s point of view, while at the same time, more people would be willing to work but will not be able to get a position.

“This is the conundrum of having a minimum wage - those who are already working will benefit due to higher income, but the labor market as a whole may be hurt due to a rise in unemployment,” discussed Dr Irwan.

Dr Irwan however cautioned that the government must realize that the immediate implementation of minimum wage should be a temporary measure to correct market failure which must be accompanied by changes in real economic sector (increased productivity, real added value, more output, etc.) for this policy will be sustainable in the long run.

“An immediate implementation of minimum wage is a type of market shock that will affect the labor market, where the minimum wage is now higher than the prevailing market wage, and this leads to a rise in unemployment before the market could adjust to this shock.

“The government could also minimize this impact by implementing other business friendly policies that could reduce this temporary increase in cost while waiting for productivity increases to justify the higher wage. These business-friendly policies should be focusing on reducing the cost of SMEs since they employ about 65% of total labour force in the country which contributes to nearly 36% of our GDP.

“Among the immediate steps that could be taken includes a cut in corporate tax especially for the SMEs, incentives for using local inputs and materials, incentives to send workers for training to acquire new skills or increase their motivation,” he said, adding how some of these measures are already being taken by the government, hence, making us on the right track.

In the long run, Dr Irwan believes the government needs to provide more good infrastructure and institution to support these changes as the economic environment must be friendly and not adversely affect the efforts to raise productivity. Besides infrastructure, government could also provide training courses on crucial skills that have the potential to raise the productivity of workers, he added.

Ultimately, Higher Minimum Wage Must Lead To Greater Productivity To Be Sustainable

The wage hike should also be accompanied by improved productivity to make the extra cost to be shouldered by the employer economically viable otherwise it may lead to a spurious inflation with an increase in unemployment.

“Employees have more money to spend due to higher wage, while these higher wage raises the business cost of the employers. If there is no changes in their productivity, employers will simply transfer these additional costs to the consumers by raising the prices of their goods and services.

“Now, although employees have higher income, they need to pay more for the same amount of goods and services due to the rise in prices. Furthermore, employers need to see an increase in productivity so that they could afford to hire new workers where they need to pay higher wage now. Without such increase, employers will not be able to hire new workers. This leads to unemployment.

“Without a productivity increase, the minimum wage policy remains an artificial instrument that will have no positive real impact on the economy - only increase in cost and unemployment. The model will not be sustainable in the sense where employers will have no choice but to pay more to workers but the employers will transfer the cost to workers in the end via higher prices and more unemployment.”

In return for earning a higher minimum wage, workers must also be receptive to learning new skills, be adaptable and flexible, even relocating and most importantly to be proactive in improving their own productivity and efficiency. At the end of the day, higher income for Malaysians is a win-win.

Taxes are like condominium maintenance fees – the more people contribute, the more it benefits everyone. So with higher income, more people can afford to pay taxes. Malaysians will then have a stronger say in how our Budget is spent as well as more funds for developing the nation, Dr Irwan opined.

“Besides workers, the employers must also realize the long run benefit of such policy as with a comfortable wage and decent living, workers will be motivated and could really focus on their job, hence, directly or indirectly increasing the profit.

“As workers have more wages today and employers have more profit, the tax contribution will be higher. However, whether the high tax will really translate into more benefits for everyone is a different matter since it depends on how the government redistributes those taxes and who are the recipients.

“Whether we have a stronger say in our budget or not, it does not depend on how much we contribute in tax payment but rather, on the government institutional framework. However, I believe that for a stronger win-win situation, the government should redistribute the tax collected from the workers and employers on related sectors which includes on training programs, improve education with emphasize on good values, to equip workers with the skills needed to increase productivity in the long run; as well as better infrastructure and government services to facilitate businesses,” he concluded.

-Malaysian Digest

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