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TMI Article: Cutting ministers’ pay won’t help workers, say economists

Photo by CEphoto, Uwe Aranas

This article was written by Hailey Chung Wee Kye and was published in The Malaysian Insight

SOCIAL media users have been baying for a massive cut in ministers’ salaries so that these politicians too could feel the impact suffered by the ordinary people, whose incomes have dropped.

Following new government data showing the median salary fell by 9% last year, many Malaysian have expressed their anger over the large salary gap between the ministers and the average person.

However, economists warned that while slashing ministers’ salaries and perks would satisfy the public, it would not raise the minimum wage and improve lifestyles.

The government’s chief statistician, Dr Mohd Uzir Mahidin (https://twitter.com/Dr_Uzir/status/1415170210047291393), revealed last week that the mean monthly salary fell for the first time since 2010.

“After two consecutive years recording a mean of more than RM3,000, the amount declined to RM2,933 in 2020 from RM3,224 in 2019,” he said.

In response to Uzir, @jonahlau (https://twitter.com/jonahlau/status/1415183625176240128) wrote, “It would be interesting if the data was available to see if (the) median salary for WP (Wilayah Persekutuan) Putrajaya had the same decline in 2020.”

Aida Rashid (https://twitter.com/aidarshd/status/1413138554956382209), 24, trainee lawyer in Selangor, said there was a need for people to pressure the government to reduce the salaries and benefits of ministers even before the numbers were announced.

She tweeted: “So does Malaysia already have a pressure group to advocate for minimising ministerial wages and increasing (the) minimum wage? Asking for a friend.”

Aida is also the marketing director of HungerHurts Malaysia – a volunteering platform to eradicate poverty.

“We need to care enough, be angry enough for those in power to realise it is outrageous for ministers to earn so much when the average person still earns a RM1,200 minimum wage,” she told The Malaysian Insight.

She said politicians had lost touch with the realities on on the ground. “They don’t understand the struggle the people have to go through to just put food on the table. They don’t empathise with our suffering.

“They work for us, not the other way around. They should be reminded of that.”

A teacher in Kuala Lumpur, Chu Soon Qin, 26, said the ministers did not deserve the high pay “looking at how our current government is running the country”.

Felicia Tng, 25, an underwriter, agreed. “If a normal employee is paid according to his performance, then why not our ministers?”

Systemic problem

Benedict Weerasena, an economist at independent research institute Bait Al Amanah, said reducing ministers’ salaries would not do much beyond mollifying the people who are highly dissatisfied with the cabinet’s performance.

“But the drop in median and mean wages in 2020 is due to a weak labour market. Lowering ministers’ salaries will not change the market forces in the labour market,” he told The Malaysian Insight.

Universiti Malaya economics professor Rajah Rasiah said slashing the ministers’ wages will no doubt send a positive signal.

“While our ministers’ salaries and perks can be considered as overly high, the total of their incomes would not compensate sufficiently for the wages of workers lost.

“If our informal labour force constitutes 60% of the total labour force, we are looking at around eight million workers who either need complete or part wage substitution.”

Rasiah said the data from the Statistics Department did not provide sufficient information about underemployed and underpaid informal workers who faced the brunt of the health cum economic crisis.

Both economists said the drop in mean monthly wages was expected owing to the economic crisis that accompanied the Covid-19 pandemic.

Weerasena said several workers’ unions in other countries had successfully negotiated enhanced health and safety measures, job preservation and pay improvements during the pandemic.

Workers’ unions have traditionally been regarded as significant instruments for protecting workers’ interests and strengthening collective bargaining power for better wages, he said.

“However, there are potential unintended consequences if wages are kept artificially higher than market forces.

“Will this rise in wages as a result of unionisation cause more businesses to shut down as they cannot bear the increasing cost, resulting in more losses of job opportunities?

“In other words, a well-intentioned move to raise wages might result in higher unemployment.”

Wages to drop further in 2021

The solution to improve wages in the long term would still be better if systemic issues in Malaysia are dealt with, Weerasena said.

“For instance, the growth of overall wages has been suppressed by Malaysia’s high dependence on low-skilled migrant workers, which negatively traps our nation in a low-wage, and low-productivity investment destination.”

Rasiah said that there were unionised sectors in Malaysia but union densities had shown a decline.

“Not only that, new industries such as the gig economy have rendered workers scattered with little capacity to be mobilised under current industrial relations laws in Malaysia.

“Strong and enforced application of labour laws and rules can offer workers more protection, including access to safety nets,” he said.

Rasiah added that real wages over January till July 2021 would have fallen significantly owing to inflationary pressures from rising food and petroleum prices.

“The falling imports on food supply in Malaysia, which could have translated into lower real wages in 2020 with the inflationary effects owing to food supply shortages, were cushioned by the crash in petroleum prices in 2020.

“But oil prices have soared over the last few months following a resumption of economic growth in many countries,” he said.

Prime Minister Muhyiddin Yassin announced in May that he and his cabinet would not take their salaries for three months from June to show solidarity for front-liners and Malaysians as the country continued its fight against Covid-19.

The money would be channelled to the National Disaster Relief Trust Fund to pay for virus containment work.

The high salaries of ministers have always been an issue of contention in Malaysia. It was previously reported that a minister and a lawmaker made RM55,000 a month, not counting the incentives, allowances and perks.

According to the Malaysian Anti-Corruption Commission, the prime minister earned RM93,841.65 a month. – July 19, 2021.

#BenedictWeerasena #Covid19 #MalaysianEconomy #TheMalaysianInsight

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