Sabah, Sarawak minimum wage below poverty line

The federal government’s recently announced minimum monthly wage of RM800 for Sabah and Sarawak falls below the poverty line of the two states, Penang Chief Minister Lim Guan Eng has pointed out.

During the recent Workers’ Day celebration in KL, workers were demanding a minimum wage of RM1500 per month. Penang has come up with a minimum wage of RM1100 for workers in state agencies and state GLCs while Selangor has RM1500 for state GLC workers. The federal government announced a RM900 minimum wage for private sector employees in the peninsula and RM800 for those in Sabah and Sarawak.

Ironically, Sarawak is the richest state in the federation in terms of per capita GDP. According to an Aliran correspondent, citing Statistics Department figures, Sarawak’s GDP per person, a common measure of wealth, amounted to RM30318 in 2009, higher than Penang’s RM29569 and Selangor’s RM27609, and much higher than Johor’s RM18458. But obviously, as we all know, the wealth in Sarawak is being disproportionately distributed, fabulously enriching sections of the elite and ruling classes.

Guan Eng in a statement said:

Prime Minister Dato’ Sri Najib Tun Razak’s announcement of a floor wage for the private sector at RM900 per month for workers in the Peninsular and RM800 per month for those in Sabah and Sarawak as the “right thing to do”, is wrong as it is blow the poverty line for Sabah & Sarawak. Whilst DAP agrees with Najib that getting the correct balance between guaranteeing workers a decent wage and employers’ needs, BN must have lost it sense of balance to fix the minimum monthly wage below the PLI of RM830 per month for Sarawak and RM960 per month for Sabah.(9th Malaysia Plan)

Najib should sack his senior economic advisors if he still believes that the minimum monthly wage had considered factors proposed by the World Bank such as cost of living, the poverty line index and unemployment rate. With productivity rising by 6.7 per cent annually but real wages going up by just 2.6 per cent each year, BN’s proposed minimum monthly wage is grossly insufficient as it is lower than Pakatan Rakyat’s RM 1,100 minimum take-home pay every month, which is inclusive of all fixed allowances but excluding over-time payments.

BN Federal Government’s minimum monthly wage of RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak is insufficient as it is not only discriminatory against workers but demonstrates a glaring lack of commitment by BN to reduce poverty when it is far below the poverty line for East Malaysia.

This is becase the cost of living in Sabah and Sarawak is much higher compared to the Peninsular, which has a PLI of RM720 per month. In other words, even if the RM800 per month minimum wage is implemented in Sabah and Sarawak, it will still be far below the PLI as defined by the Malaysian Government.

In addition to the proposed PR minimum wage of RM1,100 that will be able to meet the basic needs of workers across the country, we must also be aware that Malaysia is fast-becoming an indebted nation where families spend everything and beyond what they earn. For example, Bank Negara’s Annual Report 2010 revealed that Malaysia’s household debt at the end of 2010 was RM 581 billion or 76 per cent of GDP, thus giving us the dubious honour of having the second-highest level of household debt in Asia, after South Korea.

In addition, the Malaysian household debt service ratio stood at 47.8 per cent in 2010, meaning that nearly half of the average family’s income goes to repaying debts. As a rule, banks would not lend money to those whose total servicing of loans exceeded one third of their income. In other words, we are spiralling into an indebted nation.

Thus, even a minimum wage is not enough without two important considerations. Firstly, the minimum wage quantum must be indexed to the Consumer Price Index, so that it is adjusted with the rate of inflation. This will ensure that standard of living and quality of life will be protected and maintained.

Secondly, increasing the livelihood of Malaysians also requires an holistic economic strategy that is targetted at raising disposable income. In other words, we need to put more money into people’s pockets. However, this cannot be done just by setting a minimum wage. In the larger picture, we have to address the influx of unskilled foreign workers and their wage-suppressing effect, upgrade skills and productivity of our local workforce and also increase the participation of women in the workforce.

Besides that, the government must also invest in key sectors such as public transport, housing and healthcare. If cost of living is lower, disposable income will automatically increase. This concept is very simple – if it costs less to commute, buy a house and pay medical bills, then everyone will have more money. Imagine if every Malaysian had just RM10 extra every day, the economic multiplier effect will result in RM280 million extra circulating in the economy every day. That is no small amount. In other words, if we can increase the purchasing power of our people especially the lower income groups with a meaningful minimum monthly wage of RM1,100 inclusive of allowances, we will be able to increase domestic demand and create a healthier economy for all Malaysians.