September 16, 2021 House of Trust

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.

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