Friday, March 2, 2012

MINIMUM PAY


As posted by Dr. Mahathir Mohamad at Che Det on March 02, 2012

1. We all would like to see Malaysia become a high-income country. However we must also be concerned about our competitiveness. Increasing incomes must raise the cost of production unless there is a corresponding increase in productivity.

2. But already we are having far too many holidays. To the 52 Sundays, have been added, 52 Saturdays. We now have holidays for the holy days of all religions, however small the followers. We now automatically replace any holiday which falls on Sunday or Saturday with another day of holiday. When we work a lesser number of days our productivity must decrease. So it will not be easy to increase productivity with the increase in minimum wages which will trigger pay increases throughout, so as to maintain the parity between the different grades of the employees. Working during holidays will also cost more. So will contribution to EPF and rates of pensions.

3. Between higher pay and shorter working hours, plus all the other costs, the cost of production of goods and services must increase considerably.

4. Once, during the Government of a previous Prime Minister, a 25% salary increase was given to Government servants. There is no evidence that Government revenue had increased by 25%. The normal increase is about 10%. What this means is that the increase in operation costs due to the 25% salary increases have to be met through reduction of allocation for development. Reducing needed development is not going to be good for a rapidly developing nation.

5. The West today is in great financial trouble with at least one country going bankrupt. The reason is simple. The West has been overpaying their people. High wages and salaries, huge bonuses and numerous costly benefits such as unemployment pay gave the developed West an appearance of prosperity. But their profligate ways is not sustainable.

6. Faced with competition from eastern countries, they lost their markets. For a time they benefitted from the financial markets. But the financial market is about gambling. And as happens with all gamblers, they must lose eventually. And that plunged them into this intractable financial crisis.

7. This is what happens when wages and compensations for work are not accompanied by increases in productivity. I fear Malaysia may be heading this way if we pay more for less work, as we are doing now.