Why are employers scared to reveal wages?

 

Malaysian employers have yet again shown how out of touch they are by roundly rejecting a rather modest suggestion to disclose the salaries they offer.

The free flow of information is a prerequisite of free markets. In the labour market, employees need to know what salaries are available so that they can get a fair wage where they work or quit and move on.

Employers need to know what salaries to offer in order to attract and retain the right staff.

At the hiring stage, job-seekers need to know the salary on offer before they apply. Otherwise everybody wastes time and money in recruitment only to be rejected when disappointing pay packages are finally revealed.

Despite these obvious realities, many excuses have been given by the upper echelons of employers who oppose revealing the wages they pay their current and prospective employees.

First, the absurd idea that disclosure of salaries in job advertisements breaches employee confidentiality, when of course the idea is to reveal the wage for the job not the person.

Second, that wage transparency will hamper free competition and make wages inflexible rather than market driven when the exact opposite is the case.

Third, that mandatory disclosure of salaries encourages employees to focus on the highest-paying jobs rather than those that fit them better.

The hope of good pay is an incentive to improve your qualifications, the idea that you should not aim for a high salary because you are just not good enough is a dream-crusher holding back generations of talent.

Finally, the ever present shroud-waving that anything that benefits employees will cause wage inflation as companies try to outbid each other in competition for talent.

The threat that higher costs will be passed on to consumers quickly follows and then “thousands of businesses will close” as the big finale.

These arguments are predictable and once again put Malaysian employers in a very bad light.

A properly functioning labour market safeguards the interests of employers but not at the expense of employees.

The responsibility for wages does not rest solely with employers. It is a market based transaction that also includes workers. Both sides need to know what is on offer when negotiating the final wage.

Organisational culture is important in wage determination but a mean-spirited approach damages businesses in the long-run, causing high staff turnover costs.

When there is too little information the market fails, employers dominate and wages will be suppressed.

We already know from government statistics that half of those in formal contracts earn below living wage levels based on Bank Negara and the EPF Belanjawanku estimates. New hires and graduates are regularly paid below the poverty level.

When this happens the government steps in to regulate wages which makes business more difficult.

Employees vote with their feet and leave the formal labour market, relying on alternative ways of earning a living. This causes labour shortages for low-paying employers who only have themselves to blame.

The culture of fear and secrecy among Malaysian employers holds down wages and incomes and will harm the Madani Economy aim of ranking as a top-30 economy.

It will stymie the target of raising the share of GDP from wages from below 35% to around 45%. Low wages will hold down income and spending, reducing tax revenue, raising debt and threatening the 3% deficit target.

Responsible employers need not fear wage disclosure. Showing that wages are fair, especially for young workers, in line with basic living standards and equally applied across gender, age, ethnicity and regions can only be beneficial and even without a government mandate the market will solve the problem itself. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.