MALAYSIA has big ambitions: it wants to be a high-income nation.
But can the country do it on a low-wage ticket? Just take our minimum wage. It is a pitiful RM1,100. Deputy Defence Minister Liew Chin Tong, writing in the New Straits Times op-ed page on Monday, said the low pay is a real economic time bomb.
Some economists may say that this is being alarmist. Yes and no, we say.
Yes, because it is not going to be detonated now. No, because if we do not do something soon it will live up to its name.
The bomb may explode. The reason is not hard to see.
Paid-income is a very big part of household income. Khazanah Research Institute’s (KRI) The State of Hoseholds Report 2018 puts this at 63 per cent.
What this means is low pay will have a significant impact on Malaysian households’ standard of living.
Paying a graduate RM1,500 a month in Kuala Lumpur is not going make him a productive worker when he needs RM1,870 (according to the Employees Provident Funds’s expenditure guide) to help him make it through the month.
It is lose-lose formula for the employer and employee. But it appears that Malaysia may not be able to do much, at least for now.
There are many reasons for this. One is the unwillingness of the employers to raise the wages.
The Malaysian Employers Federation, which is a barometer of sorts of the corporate world, has voiced its reluctance on at least two occasions.
Once when the government tried to raise the minimum wage and again when Bank Negara Malaysia recommended paying living wages — location-specific income needed to meet minimum acceptable standard of living. Cost and productivity seem to stand in the way of employers offering better wages.
Associate Professor Aimi Zulhazmi Abdul Rashid, director of Universiti Kuala Lumpur’s Strategic Project Office, says the cost-productivity conundrum is not unsolvable.
All employers need to do is to change their business models. For far too long they have run on low labour cost. This is so old school.
Granted employers would require time and money to make a switch, but it pays for them to start now.
The government, too, isn’t helping. Aimi says Malaysia needs to shift gear when it comes to investment policy.
We have long positioned the country as a low labour cost destination to attract foreign direct investment, Aimi laments.
This is despite Malaysia moving up the quality and multilingual workforce ladder over the last decade.
Big players in automation, robotics, research and development are still staying out. So we remain a semi-finished goods producer to support other countries’ high-end products.
Our service industry, too, is similarly positioned: a destination for companies with cheap labour business models.
Shift we must. But transitioning from the middle income country that we are to a high-income one requires Malaysia to move from a “hub of production” to a “hub of creation,” as KRI puts it.
The move is within reach, but dangling low-pay packets is not going to take Malaysia across the production-creation bridge.