Introduction of minimum wage NEM sets a rather ambitious target to achieve income per capita of USD17,700 by 2020.
2020 is less than 10 years away and if going by the non-correlation of economic planning and results achievement of the past decade, it is necessary for any economists to take a more prudent view of the country’s economy for the next 10 years.
While NEM has been touted as the a game-changing economic document that will propel the country to the status of developed nation, surprisingly the measures suggested to improve personal income is not at all game-changing.
The same vague and conceptual measures of upgrading the skills, bringing in technology through R&D and going for high value services have been suggested and included as targets since 2000 in 8MP.
Clearly, the measures did not bring results as expected (more so because they were not implemented seriously as there was hardly any reform in important institutions in the country). Therefore, Pakatan Rakyat feels the country must move beyond the usual rhetoric of up-skilling and upgrading while the government continuously allow a huge number of cheap foreign labours to be brought into the economy.
On this point, it is high time that Malaysia considers the introduction of minimum wage seriously.
Pakatan Rakyat calls upon the government to take the necessary steps to bring the country closer to the introduction of minimum wage. This should begin with thorough public discourses on the pros and cons of minimum wage to the country in a non-partisan manner to ensure the public is aware of the concept of minimum wage.
The introduction of minimum wage is expected to cause a one-off alignment in the pay structure across the board – all levels of employment and across the industry.
For the industry, it provides the urgency to automate and reduce reliance on foreign workers. Pakatan Rakyat will also review the incentives currently in place for automation in the form of reinvestment allowance as this does not necessarily encourage small and medium enterprises (SMEs) to invest to automate.
One suggestion is to divert the financial incentives from the current form of relief against future profits to a capital reinvestment fund to assist SMEs invest for automation. This way, the industry is provided with the carrot and stick measures to upgrade and automate.
The imposition of minimum wage is also expected to cause a restructuring of the industry when low cost and labour intensive industry will have to re-look at the cost structure to remain competitive.
Learning from other countries’ experience, this can lead to a re-composition of the industry whereby the industry automatically moves to higher value chain while out-sourcing or relocating the low cost and labour intensive work elsewhere.
Pakatan Rakyat acknowledges that these suggestions are anathemas to some quarters but the country requires a radical shift in order to upgrade our income level.
The least that Barisan Nasional can do is to allow and encourage healthy public discourses in non-partisan manner on these topics, so that the public is enlightened and the country can together opt for the best policy route to achieve high income by 2020.
Support for young families One of the greatest omissions in NEM is on support for young families and young people.
72% (or 20.14 million people) out of the total of 27.73 million people in Malaysia are below 40 years old. 41% (or 11.47 million people) are in fact below 20 years old. If NEM were to have a direct impact on the country, it must sufficiently address the concerns and financial woes of the majority of the citizens i.e. the young people.
Unfortunately, NEM is conspicuously silent on any radical measures to assist young people, especially those who are entering the workforce.
A rough calculation will show that young people who enter workforce in today’s Malaysia face continuous indebtedness (either by way of credit card or personal loans) to supplement insufficient income to cover high cost of living.
This issue has been deliberated at length – the fact that income does not rise in tandem with cost of living over the years imposes significant financial burdens for the young people.
In this context, Pakatan Rakyat’s insistence on the immediate 2-prong actions to lower down the key components of household expenditure by way of restructuring of key public utilities and the introduction of minimum wage is timely and necessary to relieve the financial burdens of the young people.
Ultimately, the government must review skewed industry or sectors where profits are lopsidedly appropriated to one side by imposing significant costs to the public. One such sector is the automotive industry and the inter-relation with the lack of viable public transportation in the country.
Car instalment forms a significant portion of household expenditure for young workers. A review of the make-up of automotive industry is also key if the government were to substantially reduce the household expenditure for young workers whilst waiting for the long delayed efforts to put together a viable public transportation comes to fruition.
Pakatan Rakyat is also committed to reviewing the personal income tax structure to differentiate between extremely high earners with middle class and low income earners.
In Budget Speech 2009, YB Dato’ Seri Anwar Ibrahim mooted the idea that the highest income tax bracket should be reviewed as the current highest bracket does not differentiate between middle class and extremely high earners. The additional tax revenue from such review can be considered to be re-diverted to the young people by way of higher income tax reliefs.
These are but a few measures that could have been implemented immediately to assist the young people; if only Barisan Nasional moves beyond political rhetoric and public relations campaign in managing the economy.
Reforms of key institutions If support for young family can be considered as one of the greatest omissions in NEM, the greatest omission is undoubtedly the muted response to the chorus for meaningful reforms in key institutions, voiced by various quarters among our citizenry over the years.
Pakatan Rakyat has long established and accepted that corruption is the biggest ill of the economy. Fighting corruption requires the strengthening of key public institutions such as the judiciary, Attorney General’s Chambers, Malaysian Anti Corruption Commission (MACC) and the police force.
There is hardly any mention or concrete proposals to increase the credibility of these institutions. This will become the very undoing of NEM in the future – the failure to accept and provide remedy to the biggest ill of our economy.
Without commitments for reform of these institutions, NEM will have limited effect to change the way business transactions are carried out or the government’s approach in its procurement exercise.
As these two changes are vital to re-landscape our economy, without them NEM will be rendered useless and ineffective.