PM raising civil servant pay is brave, laudable but…

Prime Minister Anwar Ibrahim’s brave move to raise civil service salaries by at least 13 percent come December is laudable.

However, he needs to clearly show how the sum of at least RM10 billion yearly needed to finance this can be raised without straining tight government finances.

If he can do that and show that he can make this a reality without endangering the country, then it is a move which will be welcomed not only by the civil service but by the public at large.

That must be the focus going forward, based on what he has said previously. In January 2023, barely a couple of months after becoming the 10th prime minister, he warned civil servants that the national debt was RM1.2 trillion, rising to RM1.5 trillion if contingencies were included.

“The reality is that the economic situation has not subsided. It is still gloomy and this has ties to international and global developments such as the Russia-Ukraine war and Covid-19 post-pandemic,“ he said.

He called on civil servants to do away with the culture of contentment and asked them to accept that things can no longer be business as usual.

Anwar addressing civil servants at a gathering in Putrajaya

The tone of his message has changed significantly from a year ago. On Labour Day this year, he gave civil servants a huge cause to celebrate when he announced the 13 percent increase effective December.

One hopes that this is not politically motivated for gains at the polls but a genuine desire to improve the lot of civil servants.

While many criticise the civil service both in terms of size and level of service, a careful examination of this does not bear it out on both counts.

Civil servants are tarred with the same brush and inconsiderate and even racist comments are often made against them. The most common misconception is that the civil service is bloated but when you compare like with like, as I did in this article, it is not.

The other charge made against the civil services is that they are inefficient. However, the only international measure of government efficiency I know of does not bear that out.

Although it can and should be better, Malaysia is ranked 39 out of 193 countries with a score of 0.99 on the World Bank’s government effectiveness index for 2022. Not great but not terrible either.

The index captures perceptions of the quality of public and civil service, political independence, the quality of policy formulation and implementation, and the government’s commitment to such policies. Scores range from -2.5 to 2.5. The top performer was Singapore with a score of 2.14.

Long overdue increase

Thus, any argument for an increase in the salaries of civil servants should be based more on whether the government can afford it and whether it is reasonable. According to reports, the last time salaries were revised was 12 years ago. Really, an increase is long overdue.

The quantum is not excessive at 13 percent or slightly more given the relentless increase in living costs as measured by the consumer price index (CPI), which many believe understates inflation.

Over the last 12 years, the CPI rose by over 130 percent. If the government can afford it, no one should begrudge the civil service that increment.

The question is, where is the money going to come from? The most likely source is cuts in broad subsidies, especially for oil, in favour of targeted subsidies. Malaysia spent RM81 billion in subsidies last year. A rationalisation exercise here would more than recover the figure.

One hopes that the proposed wage adjustment by the government will be reflected in the private sector.

Already, labour’s share of income in the economy as reflected by percentage share in gross domestic product has dropped from 35.2 percent in 2017 to 32.4 percent in 2022, far from the 2033 target of 45 percent (see chart).

Unless there is a progressive increase in wages, this will not happen. Anwar has thrown a challenge to the private sector: “Although this announcement does not directly affect the private sector, I want them to pay attention. There are private companies with profits multiplied several times over.

“So where do these profits come from? Productivity. And where does the productivity come from? It comes from the workers, so distribute a small portion. If the company makes a hundred million, give a few hundred ringgit to the workers.”

Will the private sector do it on its own without compulsion? Not likely. This is why there is a need to keep increasing minimum wages, the target being RM2,000 a month for government servants, including fixed allowances. That may be a good starting point for minimum wages in the country.

For a more systematic wage adjustment, it may be necessary to increase the powers of the National Wages Consultative Council set up under an act in 2011. Currently, the council acts only on the setting of minimum wages.

This should be expanded to enable the council to set annual increment levels in a tripartite arrangement with the government, labour unions, and employers, à la Singapore. This will be the focal point of systematic research and recommendations for wage adjustments which are fair and reasonable.

Anwar has gotten the ball rolling on wage adjustments. It’s an ongoing process which needs monitoring several times a year and adjustments yearly as we go along.

Hopefully, labour will gradually get its fair share of output, with no disruption to the economy, if all goes well. - Mkini

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P GUNASEGARAM says much work has to be done before we iron out serious wage discrepancies and inequalities.

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.