Illogical to cut living costs but not raise wages, says economist

 

Economist Geoffrey Williams says the prices of goods and services have not risen too steeply and some have actually gone down.

PETALING JAYA: The Malaysian Employers Federation’s call for Putrajaya to control the rising cost of living rather than raise the wages of workers has been met with criticism by an economist.

This comes after MEF president Syed Hussain Syed Husman said businesses were in no position to absorb increases in wage costs, calling for efforts to instead control the rising costs of products and services.

Geoffrey Williams of the Malaysia University of Science and Technology said this was “mean-spirited” and made “no economic sense” when prices of goods and services were not rising very rapidly.

With the consumer price index (CPI) staying at 2.2% in September, he said, there was no price pressure in Malaysia while prices of goods like clothing and footwear had actually fallen.

Geoffrey Williams.

“The real problem is the fall in salaries MEF members and other employers are paying. Mean salaries fell by 9% to only RM2,933 in 2020 compared to 2019, and half of those earning wages get less than RM2,062, which is a decline of 15.6%.

“These are below the household poverty level thresholds. This year, we expect lower salaries too,” he told FMT.

Williams said cutting living costs requires contractionary fiscal and monetary policies, or price controls, adding that this would only reduce MEF members’ revenues and profit margins.

“It would also raise government spending on subsidies and mean higher taxes on MEF members in the future. So it’s self-defeating.”

What the government should scrutinise, he said, was workers’ take-home pay. He believed most employers wanted to pay their employees good wages to create a positive and productive relationship with them.

He suggested that Putrajaya introduce an “earned income credit” scheme for firms with low-income workers, where employers pay the normal wages but employees below a certain threshold get a credit from the Inland Revenue Board (LHDN) instead of paying taxes.

Williams and Universiti Tun Abdul Razak’s Barjoyai Bardai said workers’ wages should reflect their level of productivity at work, with higher-value work amounting to better wages.

Barjoyai Bardai.

In this aspect, Barjoyai said, upskilling and reskilling courses were key to boosting workers’ productivity. These workers would be in greater demand in the market, enabling them to get better salaries.

But he also told FMT that Malaysian employers needed to allow their workers to be employed elsewhere so that they can earn more income, adding that bosses in Western countries were more liberal about this.

Barjoyai pointed out that wiremen were in short supply in Malaysia, which meant those who had these skills actually served two to three companies and earned a triple income.

“In the teaching profession, we have lecturers who also teach in other institutions with the permission of their university, or give tuition outside working hours. So, we have to create this opportunity for employees and shouldn’t call this moonlighting.” - FMT