Will a minimum wage drive away investors?

The MTUC resumes its nation-wide picketing calling for a minimum wage at 5 pm today.

I dropped by to check out the demo in Prai during the last picket on 25 June 2007. The turnout – a vocal crowd of close to 1,000 – exceeded the organisers’ most optimistic expectations. A large majority of the demonstrators were Malays with a smattering of Indians and Chinese – working class people. I found out from them that some factories in the area are still paying their workers a basic wage of less than RM400.

The government has said that investors will skip Malaysia if we were to introduce a minimum wage.

But check out this report from the OECD Observer website:

Minimum wages are a long-standing tradition in many other OECD countries. A minimum wage was first introduced in New Zealand in 1894, and followed a few years later by Australia. The US federal minimum wage was passed into law in 1938. Japan and Korea now have minimum wages, while in Europe, so do France, Greece, Portugal, Spain, the Benelux countries and many countries in central and eastern Europe. Ireland and the UK (not for the first time) introduced national minimum wage systems in the 1990s.

Today 21 of the OECD’s 30 member countries have statutory minimum wages, and in just over half of these countries minimum wages have risen slightly faster than average wage levels in recent years. Only in the US have the real earnings of workers on the minimum wage dropped sharply in recent years, and there is strong pressure to raise them again.

In fact, the hourly minimum wage in Ireland is 60 per cent of the net average wage in that country! That hasn’t stopped the Irish economy from booming nor has it driven away investors from Ireland.

If higher wages drive away investors, explain Singapore.

The Bank Negara governor has said that the one of the main priorities now is to boost domestic demand. Well, to me, the best way to boost domestic demand – and to ensure equitable economic growth for all – is to introduce a minimum wage so that workers can live in dignity.

The lower income group tends to save less and spend proportionately more of their incomes on essentials than wealthier Malaysians. Putting more money into the hands of the lower income group will surely boost domestic demand across the country – and spur economic activity in the most meaningful way.

It is time to introduce a minimum wage.