Malaysia a high income country? Part 1
So we have several government initiatives to 'transform' the economy but the question is: can project-driven development get Malaysia to where it wants be?
No doubt the building boom during the Mahathir years spurred the economy, aided by petroleum revenues. But is this model still applicable now in 2012 and beyond?
Let's break it down:
The population & minimum wage
Lets set aside the view of race and look at Malaysia in terms of socio-economic background. In this respect, then we resemble what I would term a 'tear drop' shape, not a pyramid.
Why this shape? Notice the small sharp pinnacle at the top and the heavy bulge at the bottom. A pyramid presumes a more equal distribution in just a few bands. An organic shape is a more accurate description of what is going on in our country.
According the government statistics, only 3% earn above RM15,000 a month while something close to 75% of workers earn below RM1,500 a month.
Actually, I am not too fussed about this phenomenon because in a capitalist economy, this is bound to happen.
What's IMPORTANT is the buying power of the ringgit. You can earn RM800 a month but if that 800 can easily purchase food, clothing and shelter with enough to save for a rainy day (i.e. not living hand to mouth), what's the problem?
The real problem here is that our buying power is almost unjustifiably weak.
The imposition of minimum wage has been hotly debated with business groups saying it will cause inflation while workers are lauding the move and wanting a higher threshold. Both have their valid points so what is the correct middle ground that we should strive for?
I believe it takes both sides to step up to the plate:
Business owners need to understand that they cannot always rely on cheap labour for profits. They must, simply must, realise that continual innovation in terms of processes, technology and training is essential. I, for one, am all for businesses to generate as much profit as possible but it must be done in the right way through innovation, offering the best product & service and correct pricing - not through keeping wages artificially low.
Workers on the other hand, need to realise that a wage comes with the obligation to do the best that they possibly can, not just show up and expect to be paid for doing a half-arsed job (my bugbear is our local F&B wait staff.. drives me up the freaking wall the way they do things). The adage of 'if you pay peanuts, you get monkeys' is only half true. The 'monkeys' need to change their attitude if they want to be paid 'human' wages.
I think it all boils down to one thing vis the whole debate which is the lack of trust. Business owners don't trust their workers to do the right thing by working better with higher wages and conversely, workers don't trust the business owners to pay them a correct wage. So it goes round and round.
Well, the genie is out the bottle anyway, minimum wage is due to be enforced.
We can only wait and see the outcome but seeing as how I love to predict stuff, I'm guessing this is what's going to happen:
Industries that are heavily unionised like banking will NOT be impacted. Why? They are already subjected to the pressures of collective agreements and the minimum that they currently pay is actually higher than the newly mandated minimum. So, there is no issue, is there?
Small to medium businesses are going to be hit badly - IF they decide to follow the minimum.
Why do I say IF?
You know and I know how they operate.
Do you think they will tamely follow the rules? Of course not!
It'll be a case of "you want to keep your job or not?", OR they may concede and pay it but other perks will disappear; don't be surprised if you start hearing things about medical coverage being taken away, SOCSO payments not being made, EPF contributions not being paid up and so on.
Now, I AM sympathetic to these businesses to a certain extent but to a limit because seriously, some of these businesses really shouldn't even be operating if they are giving bad service, providing shoddy products and/or mistreating their workers.
[Honestly, some people really shouldn't be entrepreneurs, they are not cut out for it, lack the integrity and give genuine businesses a bad name]
Small time manufacturers are going to be hit, the ones who are quick on their feet and can automate & innovate will survive.
F&B outlets that depend heavily on foreign labour are going to have to either swallow the cost initially (hehe pun intended) or close down. Those that choose to pass the cost to the customer are going to be judged more harshly on the quality of their food and service. If they don't pass muster, they're going to go down anyway. Cruel but 'tis survival of the fittest, right? That's business - you can make a lot but you can lose a lot too.
But overall, I still think it is a good move - we cannot stay on being a low-cost country when you have Indochina and eventually Africa getting to a stage where Malaysia used to be. The change has to be made and no doubt, some will not survive. But as they say, crisis comes with opportunity. Like evolution, we must grow and adapt or we will die out.
No doubt the building boom during the Mahathir years spurred the economy, aided by petroleum revenues. But is this model still applicable now in 2012 and beyond?
Let's break it down:
The population & minimum wage
Lets set aside the view of race and look at Malaysia in terms of socio-economic background. In this respect, then we resemble what I would term a 'tear drop' shape, not a pyramid.
Why this shape? Notice the small sharp pinnacle at the top and the heavy bulge at the bottom. A pyramid presumes a more equal distribution in just a few bands. An organic shape is a more accurate description of what is going on in our country.
According the government statistics, only 3% earn above RM15,000 a month while something close to 75% of workers earn below RM1,500 a month.
Actually, I am not too fussed about this phenomenon because in a capitalist economy, this is bound to happen.
What's IMPORTANT is the buying power of the ringgit. You can earn RM800 a month but if that 800 can easily purchase food, clothing and shelter with enough to save for a rainy day (i.e. not living hand to mouth), what's the problem?
The real problem here is that our buying power is almost unjustifiably weak.
The imposition of minimum wage has been hotly debated with business groups saying it will cause inflation while workers are lauding the move and wanting a higher threshold. Both have their valid points so what is the correct middle ground that we should strive for?
I believe it takes both sides to step up to the plate:
Business owners need to understand that they cannot always rely on cheap labour for profits. They must, simply must, realise that continual innovation in terms of processes, technology and training is essential. I, for one, am all for businesses to generate as much profit as possible but it must be done in the right way through innovation, offering the best product & service and correct pricing - not through keeping wages artificially low.
Workers on the other hand, need to realise that a wage comes with the obligation to do the best that they possibly can, not just show up and expect to be paid for doing a half-arsed job (my bugbear is our local F&B wait staff.. drives me up the freaking wall the way they do things). The adage of 'if you pay peanuts, you get monkeys' is only half true. The 'monkeys' need to change their attitude if they want to be paid 'human' wages.
I think it all boils down to one thing vis the whole debate which is the lack of trust. Business owners don't trust their workers to do the right thing by working better with higher wages and conversely, workers don't trust the business owners to pay them a correct wage. So it goes round and round.
Well, the genie is out the bottle anyway, minimum wage is due to be enforced.
We can only wait and see the outcome but seeing as how I love to predict stuff, I'm guessing this is what's going to happen:
Industries that are heavily unionised like banking will NOT be impacted. Why? They are already subjected to the pressures of collective agreements and the minimum that they currently pay is actually higher than the newly mandated minimum. So, there is no issue, is there?
Small to medium businesses are going to be hit badly - IF they decide to follow the minimum.
Why do I say IF?
You know and I know how they operate.
Do you think they will tamely follow the rules? Of course not!
It'll be a case of "you want to keep your job or not?", OR they may concede and pay it but other perks will disappear; don't be surprised if you start hearing things about medical coverage being taken away, SOCSO payments not being made, EPF contributions not being paid up and so on.
Now, I AM sympathetic to these businesses to a certain extent but to a limit because seriously, some of these businesses really shouldn't even be operating if they are giving bad service, providing shoddy products and/or mistreating their workers.
[Honestly, some people really shouldn't be entrepreneurs, they are not cut out for it, lack the integrity and give genuine businesses a bad name]
Small time manufacturers are going to be hit, the ones who are quick on their feet and can automate & innovate will survive.
F&B outlets that depend heavily on foreign labour are going to have to either swallow the cost initially (hehe pun intended) or close down. Those that choose to pass the cost to the customer are going to be judged more harshly on the quality of their food and service. If they don't pass muster, they're going to go down anyway. Cruel but 'tis survival of the fittest, right? That's business - you can make a lot but you can lose a lot too.
But overall, I still think it is a good move - we cannot stay on being a low-cost country when you have Indochina and eventually Africa getting to a stage where Malaysia used to be. The change has to be made and no doubt, some will not survive. But as they say, crisis comes with opportunity. Like evolution, we must grow and adapt or we will die out.
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