The storm reaches our shores…

The storm has reached our shores.

In Kedah, 1,429 workers from 17 factories have been “temporarily” laid off.

In Kuching, 1,500 workers have been retrenched as Western Digital shuts its plant in March. About 60 per cent of these workers are reportedly married with children. The job losses account for 15 per cent of the 10,000 workers in the electronics sector in Sarawak.

Another 3,250 workers around the country, mainly from the electronics sector, are expected to be retrenched by over 130 employers in the next three months. And that’s just the official estimate.

Earlier in June, 1,600 workers in Nikko Electronics on mainland Penang lost their jobs when the company said it was unable to continue operations. They received a pittance in compensation.

Can you imagine what it will be like when we feel the full impact of the storm next year? Are we really prepared? Will we also come up with measures to make our economy more sustainable and socially just? It’s also time we put in place a comprehensive safety net (a national retrenchment fund) and begin re-training workers with skills to become self-employed. Unfortunately, this would require federal initiatives or funding, and that could be too little, too late.

The economic stimulus package so far is unlikely to be enough. What we need are measures to boost consumer spending. But low-income workers are already spending all their wages to support their families, so how can their spending be increased? To stimulate the economy, the lower-income group need to have more money in their pockets and the most effective way to raise their purchasing power would be to enforce a decent minimum wage, perhaps in stages and across sectors.

Economist Charles Santiago stresses the importance of a strong social safety net:

Clearly, we have not learnt important lessons from the 1997 economic crisis. How is the government going to cope with high levels of unemployment which involves workers returning from Singapore, retrenched local and migrant workers and workers in the informal sector?

Government inertia and the absence of a social safety net threaten to turn the economic crisis in to a full blown social crisis.

It should be obvious to everyone that some drastic steps need to be taken. As an urgent priority the government should commit to a RM 3 billion retrenchment fund as an immediate initiative to mitigate the negative snowball or multiplier effect of job losses, given that we are a demand-led economy. This would create confidence in the business community, workers and people at large.

Just as importantly, the retrenchment fund would alleviate human suffering. Among other things, it could provide or expand unemployment benefits including food stamps or vouchers to neutralise the income losses of unemployed workers and vulnerable groups.

By putting money into the hands of these groups, retrenched workers would still be able to pay their mortgages and rents and keep their homes, continue buying consumer goods, boosting demand in the sector and subsequently in the capital goods sector. A workers’ retraining programme should be part of the package.