Andrew Lo
KUCHING (May 21): Increasing the minimum wage would benefit the country as higher wages would lead to more spending power, thus in return increasing domestic demand and reducing the reliance on exports, said Andrew Lo.
The Sarawak Bank Employees’ Union (SBEU) chief executive officer said it will also spur productivity growth as employers have to invest in more efficient production methods instead of relying on millions of low-paid workers who are mostly foreigners.
“The World Bank has reported that Malaysian wage increases have fallen drastically behind productivity increases.
“Wages share of the gross domestic product (GDP) is at only 35 per cent much lower than the 50 to 55 per cent of our country’s competitors. Employers have benefited from all these in the past few decades,” he said in a statement.
He claimed that Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg’s recent comment that an increment of wages was pointless should prices of goods also increase seemed to mirror employers’ misguided claims that minimum wage hikes have proven to cause prices of goods to rise.
“The empirical evidence showed that minimum wage was only introduced in Malaysia in 2010, yet prior to its introduction, we experienced price increase and inflation at a higher level than after it was introduced.
“The minimum wage was not increased from 2020 to 2022, but prices have increased in the meantime, despite the pandemic. It is therefore a fallacy to claim that the price increase is due to minimum wage,” he said.
He said the formula that the National Wages Consultative Council used to determine minimum wage increases was also dependent on inflation.
“That means minimum wage would increase because inflation in the previous period has increased.
“Wages fixation principle of other workers as adopted by the Industrial Court and affirmed by the Superior Courts dictate that wages are determined by inflation.
“The lower income group actually spends most of their income on consumer goods, hence, any objection to minimum wage hikes, is also reducing spending on consumable goods, therefore, affecting businesses, especially the small and medium enterprises (SME),” he said.
Lo pointed out that Malaysia has fallen behind Singapore, Hong Kong and Taiwan as well as South Korea mainly due to antiquated views of businesses.
“We will soon fall behind Vietnam, Indonesia and the Philippines and we can notice that Indonesian workers are no longer coming in huge numbers, and we have to resort to Bangladeshis.
“We need to reiterate that the 2021 Nobel Prize for economics was awarded to David Card, Joshua Angrist, and Guido Imbens for real-world research that demonstrated, empirically, that the claim by some idea touted by conservative economists that higher minimum wages mean fewer jobs is not based on fact.
“Employers should no longer argue that an increase in minimum wage would lead to job losses. It is embarrassing that some business leaders still make this claim,” he said.
