Panic over pay rise

Who does not like to get their pay rise? Then why are some people panic over it?

Prime Minister Datuk Seri Najib Razak brought the 1.4 million civil servants the good news of pay rise on 8 March 2012, and the minimum wage policy for the private sector will also be revealed soon. The country seems to have been moving towards a high-income economy.

Some people are happy, but some are worried. Former Prime Minister Tun Dr Mahathir Mohamad is worried that if productivity is not improved but only salaries are adjusted, the country might follow the footstep of some Western countries and face bankruptcy.

I believe that he was referring to the pay rise in civil service sector. Adjustments to the benefits of civil servants will affect the overall situation.

For example, former Prime Minister Tun Abdullah Ahmad announced in May 2007 that salaries in civil service sector would be increased from 7.5% to 35%, there was also an additional 20% of increment for military and police personnel, as well as 100% increment for living allowance. The annual expenditure then increased by RM6.8 billion.

The people speculated that it was an election candy and this time, it is estimated that the pay rise between 7% to 13% would again, cause billions of additional expenditure.

Pay rise will worsen the budget deficit and administrative expenditure will further nibble the development expenditure.

The private sector faces a greater pressure, as talents might flee to the public domain. After the implementation of the minimum wage policy, the overall pay will rise. Since foreign workers and non-technical staff are receiving a minimum wage of RM1,000, it is impossible not to increase the salaries of middle level officers.

Another negative impact is, a major pay adjustment would lead to price hikes. Salaries are indeed increased, so do prices.

The current situation is almost the same as the situation in 2007, when the BN was also planning for the general election. However, the involving area is wider this time, as it includes the private sector. Would the country be able to withstand the wave of major pay rise this time?

One of the advantages of Malaysian manufactured products is cheap prices. The increase of costs will cause the fall of competitiveness and weak company performance could lead to lay off.

If the government keeps spending based on political considerations, our children and grandchildren might have to bear the debts and pay the price.

I also wonder, even if everyone gets a RM300 pay rise, would it be enough to afford the rising cost of living? For example, since the My First Home Scheme was launched, banks have never approved a 100% loan for young people earning less than RM3,000 a month. They are not eligible to buy RM400,000 houses.

Would young people be able to purchase houses just by implementing the minimum wage policy and increasing civil servants' salaries? The root of the problem is not only about salaries, but also uncontrolled market speculation.

Self-sufficient in food could reduce the people's food expenditure.

According to the World Bank's growth report in 2008, Strategies for Sustained Growth and Inclusive Development, the key to get rid of the middle-income trap includes to successfully transform economic structure into technology-intensive industry, be active in independent innovation, ensuring a rapid growth for the services industry, accumulating wealth and having a sound system.

Malaysia lacks transformation conditions and would the pay rise bring a negative impact? Would it cost the country a heavy price?

-Sin Chew Daily