[COLUMNIST] Combine statutory minimum wage with progressive wage model too

Given that employers as represented by the Malaysian Employers Federation (MEF), Federation of Malaysian Manufacturers (FMM), and Small and Medium Enterprises Association (Samenta) decry the move and claimed that they haven’t been (extensively) consulted, it’s probably an indication that the tripartite model isn’t working properly (as it should).

What’s needed isn’t merely a tripartite participation but consensus – a “synthesis” that could emerge from the traditionally “dialectical” (i.e., opposing) relationships (and interests) between the capitalist and worker.

As it is, the deliberations of the National Wages Consultative Council (NWCC) on the Legislative Technical Committee Impact Study and Review of the Minimum Wage Order 2020 haven’t produced a consensus or final agreement on the matter. Article 25(1) of the 2011 Act mandates “[t]he Council [to], at least once in every two years, review the minimum wages order”.

The key, of course, isn’t to resolve the existential/real-world tension either way (i.e., exclusively in favour of employees or employers) – that would “lead to” the withering away of the State/Law as an impossible utopia both under a workers’ paradise or market sovereignty, i.e., Communism or free market fundamentalism, respectively, as mirror opposites.

A fresh framework/philosophy/vision is needed for the Malaysian tripartite model, going forward.

In this regard, we could well emulate Singapore’s tripartism – which had come a long way since the tumultuous period of subversion, infiltration and chaos by the Communist United Front (CUF) organisations that had “captured” (some of) the trade unions.

Under Singapore’s tripartite model (which could also be found in Germany under its social market economic system), consultation with stakeholders takes place on the basis of trust and confidence.

This is only possible when the State or government of the day gives that guarantee that the welfare of the workers will always be protected. In return, the workers subsume (not give up) their economic interests to the wider national interests. The State promotes and protects (by regulating) the market for the benefit of both the employees and employers.

But for this to happen meaningfully, workers representatives must be allowed to have full participation in the entire related policy-making process (as is the case in Singapore – where the Secretary General of the National Trades Union Congress/NTUC is a full minister, for example).

In fact, we already have such foundations in place – with the EPF, Socso and legislation such as the Employment Act (1955), Industrial Relations Act (1967), Occupational Safety and Health Act (1994), etc. and not least the 2011 Act.

Current amendments to the 1955 Act, as passed on March 21 in the Dewan Rakyat and pending the Dewan Negara’s vote, provide for enhanced legal entitlements and protection to low-wage workers with particular and especial reference to maternity leave – now extended from 60 to 98 days in line with the International Labor Organization (ILO) Convention.

However, as YB Charles Santiago (MP for Klang) and the Galen Centre for Health and Social Policy highlights, the provisions are only for women employees earning RM2,000 a month and less – with the deletion of Section 44A.

According to Deputy Human Resources Minister Awang Hashim, the deletion takes into account the “expansion of scope” of the 1955 Act which allows any workers to bring any dispute(s) to the Director General (of the Ministry of Human Resources) regardless of their wage levels, compared to the previous provisions that limited this to those earning RM5,000 a month or less.

Returning to the minimum wage issue: Since the new level of RM1500 comes across as a fait accompli to employers, what should have been done instead for the tripartite model to work is negotiations or bargaining within the NWCC among the three stakeholders.

Pitting the employers’ side against the employees’ side may be the most convenient route for the government of the day to take. But this always leaves one side dissatisfied and trust eroded.

What needs to be done, moving forward, is to fuse the interests of both sides into a win-win situation that in turn is integrated into the national narrative.

This is where the minimum wage could be combined with a progressive wage model for low-wage workers – as practiced in Singapore also. However, unlike in Singapore which doesn’t legally mandate the minimum wage, we can combine the best of both worlds.

As the name implies, a progressive wage model allows for the linking of wage growth with productivity as measured by upskilling (or reskilling and cross-skilling, where applicable).

Even as Malaysia moves onward towards a highly-skilled economy, we can still make sure that the low-wage workers move “up” as well – through a productivity-linked progressive wage model.

Employer bodies like Samenta have been calling for labour wage growth to be linked to productivity.

On the other hand, the Malaysian Trades Union Congress (MTUC), Parti Sosialis Malaysia (PSM), etc. have rightly highlighted the mismatch between rising cost of living and the stagnant wage growth.

In our Malaysian context, a progressive wage model could also be applied across the sectors (like in Singapore as of 2022 onwards) whilst at the same time allowing for adaptations/modifications, flexibilities and variations in its applications.

And it can be made compulsory for certain sectors (where commissions and bonusses are non-existent) for companies to renew their licenses/permits (e.g., business registration under the Companies Commission of Malaysia/CCM and business premise operations under the local authorities).

Our tripartism – via the NWCC or some new body in consultation and with the participation of the sector or industry-specific stakeholders – would chart the pathway of the training process for the various sectors and industries and accreditate/certify the courses.

We can, in addition to the statutory minimum wage, incentivise workers to upgrade their occupational skills, including their job qualifications, e.g., from cleaner to (accredited) cleaning supervisor. In the case of the government (ministries, departments) and government-linked companies (GLCs), there could be a policy whereby cleaners who have undergone skills training are paid a higher wage by adjusting the contract fee to the cleaning company.

In the meantime, i.e., during the upskilling process, training fees and trainee allowances are paid by the government or co-shared with the employer as the case may be.

Employers who co-pay for the upskilling process should be entitled to tax deductions and allowances.

It goes without saying that a progressive wage model benefits the business of employers too. For example, landscaping and horticultural companies can demand higher charges when their workers are accredited or properly trained professionals/specialists.

A retail worker who upskills in the basics of accounting and financial management (including the use of business solutions software tools) may not enjoy a big jump in wages but at least has competitive advantage when it comes to promotion (and bonus when the new skills deployed result in higher sales and revenue).

Of course, there could have been (hypothetically speaking) a progressive wage model in place without the minimum wage hike for now (temporarily) – or at least incrementally as proposed by the FMM.

Or what the government is currently considering – that is, exempting SMEs and micros from the requirement.

Or as YB Ong Kian Ming (MP for Bangi) has proposed – consider lower minimum wages in non-conurbation areas, i.e., outside of the Klang Valley, Iskandar Malaysia, Penang, Greater Kota Kinabalu, Kuching, etc. (“Labour policy reforms needed along with new minimum wage”, Malaysiakini, March 22, 2022).

EMIR Research also agrees with the YB who in the same article called on the government to subsidise wage increases under the new minimum wage (e.g., with less than 10 employees). This Wage Subsidy Programme (WSP) 6.0 could last for six months and perhaps renewable for another 3 months plus another 3 months.

According to the Malaysia Association of Cleaning Contractors President Noruddin Idris,“[a]n increase of RM300 in basic salary will increase [EPF] contribution to RM39, RM5.30 contribution to … [Socso], RM3 contribution for Human Resources Development Fund [HRDF], RM0.075 contribution for Personal Insurance Scheme, and provision for annual and medical leave of RM21.15. This means that the actual increase in labour cost is RM362.53 [among others] (“Increasing minimum wage not holistic solution, industry players say”, The Malaysian Reserve, March 21, 2022).

Malaysian Semiconductor Industry Association President Datuk Seri Wong Siew Hai said that “[t]he [new] minimum wage … may potentially drive some companies to include … allowances and incentives into the basic pay” with the “… corresponding knock-on ramifications across the entire wage and salary structure of all E&E companies. Vulnerable small and medium Malaysian E&E companies will be impacted the most …” (“More calls for review, delay of minimum wage implementation”, The Malaysian Reserve, March 22, 2021).

Although we have said all the while that introducing the minimum wage now would add additional pressure with particular emphasis on the SMEs, we acknowledge the reality/dynamics of rising cost of living too.

This is why (at the same time) income support should be expanded/increased under the Bantuan Keluarga Malaysia (BKM). In due time, the BKM cash transfer could be further “consolidated” into a single “universal credit” (following the practice of the UK) but as a form of negative income tax (as proposed by economist Professor Dr Geoffrey Williams) alongside child tax credits. This should be doable since every worker should have a tax identification number (TIN) by now (as it was introduced last year).

Finally, we once again echo YB Ong Kian Ming in calling for the government to consult the stakeholders as “part of the process of thinking through current labour market policies” and going beyond merely increasing the minimum wage.

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Jason Loh Seong Wei is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.