Higher minimum wage for social equity
06 Feb 2023 | The Star

Targeted subsidies has become a hot issue, following concerns over stretched government finances.

While ground sentiment on the coming Budget 2023 seems to focus more on the cost-of-living factor, and less on wages, the introduction of targeted subsidies should be accompanied by a higher minimum wage.

Historically, with the continued payment of subsidies in Malaysia, there has been limited incentive for employers, including the government, to raise wages.

As such, our income has not kept pace with the cost of living; in fact, real wages have been falling.

Rising prices and inflation is anticipated if the current government targets subsidy payments to the lower income groups while reducing subsidies elsewhere.

To tackle rising prices, price controls is not the overall answer.

In response to rising costs and inflation arising from the reduced subsidies, we have to raise minimum wages.

To be more effective, wage increases should be on a differentiated basis, based on the cost of living in the areas and states.

“This should be the strategy roadmap if subsidies are going to be targeted to reduce the government’s burden,’’ said Gamuda Bhd group managing director Datuk Lin Yun Ling.

To cope with the higher cost of living in Kuala Lumpur and Selangor, workers in these areas should be paid more than the current minimum wage of RM1,500 compared to the less urban areas; a blanket approach will not work, he added.

Gamuda, as a regional engineering and property development group, has operations with hundreds of staff each in Vietnam, Australia, Taiwan and Singapore.

“We note that none of these economies has any form of government-funded subsidies,’’ stressed Lin.

Even Vietnam, with a lower Gross domestic product per capita compared to Malaysia, does not have a fuel subsidy but an ‘environment tax’ surcharge on fuel.

From its operations over the last ten years in the regional markets, Gamuda has observed that wage growth in these countries (Vietnam, Australia, Taiwan and Singapore) has exceeded the increases in the cost of living.

Market forces work to push employers to pay wages to sufficiently cover the ever-rising cost of living and ensure that the balance available as disposable income, is commensurate with competition at each income band.

In Australia, where Gamuda has hundreds of employees, of whom 70% are white collar and 30% blue collar, data on increases in the cost of living, from reliable industry sources, is used to set industry benchmarks for pay increments across all income bands.

This usually takes place at year end.

In 2022, Gamuda raised its minimum wage in Malaysia above the government’s requirements from RM1,200 to RM1,600 for foreign workers, and RM1,800 for locals.

This was the first step in a planned series of measures.

Graduate entry level pay at Gamuda was increased to RM3,500, thus raising the floor in the immediate salary bands above this, up to RM5,000.

“When it comes to foreign workers, their salaries should only be slightly lower than those of locals”

– Justin Chin Jing Ho, Gamuda Engineering Managing Director

“When it comes to foreign workers, their salaries should only be slightly lower than those of locals, so as not to undermine the competitiveness of the locals, in terms of development and employment,’’ said Gamuda Engineering managing director Justin Chin Jing Ho.

For foreign workers, their salaries should not be too low, as the all-in cost, after including levies and accommodation, needs to be of a sufficient amount.

Housing is an important social issue.

Construction workers on Gamuda’s projects, especially foreign workers, are housed at purpose-built centralised labour quarters (CLQs), which are spacious with strong showers, communal kitchens, sundry shops and on-site clinics.

Recreational facilities like cricket and football are available to foreign workers, for a conducive environment to work, stay and play.

Provision of CLQs has been a standard practice at Gamuda for decades, ever since its development in Kota Kemuning back in the 1990s.

Gamuda also notes the increased focus on modern slavery, in addition to increasing the minimum wage above the government’s requirements and the provision of industry- eading CLQs.

An anti-modern slavery taskforce was set up in 2022 to govern and audit labour practices across the Gamuda group to ensure that their workers are treated with dignity.“We try, as far as possible, to hire our workers directly so that we can minimise the risks of withheld wages and so on, if we use agents or middlemen,” added Chin.

Modern slavery refers to the exploitation of cheap labour for economic gain.

It has become a pertinent global issue as more countries depend on foreign workers to carry out low-paying jobs, for example, in factories, plantations and the construction sector.

In most instances, the workers are indentured and unable to leave at will.

This presents a risk to most construction companies as they rely heavily on foreign labour, hence, compliance with minimum wages and other steps are taken in relation to ensuring human rights.

Various social aspects are important to help ensure a better life for everyone, besides just looking into the environmental aspect of environmental, social and governance (ESG) standards.

Development which meets the needs of the present generation without compromising the progress of future generations, is more sustainable in the long run.

So, as our government deliberates and finalises the country’s targeted subsidies, it should be mindful that effective fiscal incentives, such as wage increments, are implemented.

Foreign direct investors have also indicated that our wages are already too low, and there are growing concerns on brain drain and talent shortage that is affecting our competitiveness.