Between living and existing
Published on: Sunday, May 26, 2019
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Some 20 years ago, the minimum wage was about RM400-RM500. 10 years ago, it had risen to about RM750-RM800 per month. And back then, I always wondered how young adults from the smaller rural villages who came to Kota Kinabalu to work and earn a living survived.

Most would rent small rooms in the city centre in Api-Api, Asia City, Segama and Sinsuran, whilst others would live with relatives out in Inanam or Penampang and make their way by bus every day into the city to earn a minimum wage to survive.

What shocked me back then, and still shocks me today is how little they have left at the end of each month to live on.

After paying rent for their room, and paying for meals because there were no kitchens in their rented accommodation’s to cook or store food, and after paying for basic necessities each day, they would be left with RM10 to RM20. In some cases, their money would have finished well before the end of the month and they would resort to one meal per day just to survive month to month with no hope or chance of savings other than what they had in their EPF accounts.

This scared me and bothered me at the same time so I introduced a lunch money programme each day whereby I would pay out RM5 per person per day to pay for their lunch at work and to help reduce their cost of living in some small way. Back in the 1990s, you could buy a meal for RM5 with a drink. Today, the realities are that a decent meal anywhere in KK will cost you nothing less than RM7-RM10 per meal with a glass of water in a coffee shop.

As much as the government has done its best to push minimum wages up beyond RM1,000 (and it has taken a very long time to do so), the realities today are that RM1,000 is just not enough for an average human being to live on in Malaysia. The realities are that a low income worker needs a minimum of RM1,500 to be able to live what I would like to call a “fair life” and to have a decent “living wage.”

Anything less and it becomes incredibly hard for anyone, paying rent, and paying for meals and putting money aside for essentials to survive.

Bank Negara Malaysia (BNM) recently introduced the concept of “Living Wage” which is a guide on what is acceptable as minimum living standards. It is not a minimum wage indicator nor a benchmark to assess poverty, but rather a fair view on an income level that is needed for a household to be able to afford a minimum acceptable living standard, which consists of: 

The ability to participate in society, the opportunity for personal and family development, and freedom from severe financial stress. Sometimes, living wage is also described as fair wage or decent wage.

When Bank Negara speaks of a minimum acceptable standard of living it goes beyond just being able to afford necessities such as food, clothing and shelter. At the same time it should only reflect needs, not wants. It does not calculate the costs of different lifestyles or location. It also reflects on a person’s ability to live a decent life in dignity. 

The big problem in Malaysia society (it is actually a global problem) is that too much wealth is held by too small a percentage of society and corporate businesses. 

This has resulted in income inequality and became one of the main reasons that motivated the need for a living wage framework. Besides allowing employees to afford a minimum acceptable standard of living, the living wage could also cause a positive spill-over to the broader economy as it may lead to a lower employee turnover rate and improvements in employees’ morale and productivity if they are paid what is considered “fair wages.”

Now, a “living wage” differs from the minimum wage in several ways; the living wage is not a requirement for the economy unlike a minimum wage, which is enforced by law. 

Second the living wage refers to a minimum acceptable standard of living, not just the existence of a minimum level of salary. Because of this the living wage is generally higher than the minimum wage, especially as the living costs increases. 

Last, the determination of the living wage is based primarily on the cost of living.

The living wage is meant to sustain the socially acceptable minimum standard of living, beyond the basic necessities like food, clothing and shelter.

An important part of developing the living wage is estimating a wage level that represents the minimum acceptable living standard in the given area or region. Depending on where someone lives, costs are likely to vary.

Studies by Bank Negara’s Household Expenditure Surveys of 2014/2016, Department of Statistics Malaysia, Domestic and Trade Malaysia, Co-operatives and Consumerism and National Property Centre tell us this:

An average single adult needs a minimum of RM2700 to be able to have a fair living in Kuala Lumpur on a per month basis. This includes renting a small single room apartment. It includes using public transport instead of owning a vehicle or motorcycle and depending exclusively on ride hailing apps and transportation or public transportation to travel around and eating out on average 5 days out of 7 days of the week.

A married couple without children will need RM4500 to be able to have a fair living by renting a low cost one bedroom apartment, have two small capacity vehicles (2 Perodua Kancils or 2 Proton Sagas or 1 small car and 1 motorcycle), eat at home a minimum of 2 meals per day at home and 3 meals per day at home on weekends and are then needing to pay electricity, water, fuel for vehicles, groceries and be able to live a decent life month to month with some funds being put aside as savings.

An average couple with 2 children renting a three bedroom apartment, who have 3 meals per day during the week at home and at least 2 meals on a Saturday and Sunday, own 2 vehicles and have to pay for tuition classes, clothing, groceries, electricity, water, fuel would need nothing less than RM6500 to be able to survive in Kuala Lumpur.

Now the figures suggested by the various government agencies above of RM2700, RM4500 and RM6500 are subjective. You could cut down on expenses on one side but increase expenses in another side (i.e. owning 1 car and 1 motorcycle but having to pay toll, parking charges, fuel, service for car, replacement of parts and tyres) and you could still come back to figures which translate into similar figures but via other expenses being accumulated. 

You can juggle around the expenses and reduce expenses in some areas but you will still see a rise in expenses in other areas. Essentially, you cannot really escape the real cost of living in a city, no matter what you do…yes, you may end up saving RM500 per month in some ways, or higher or lower, depending on how you choose to get to work and back, or how much you spend on meals but at the end of the day, a fair, living wage which entitles you to somewhat of a “happy life” remains there or about, the necessity for a single adult to earn nothing less than RM2700 per month, a married couple without children a minimum of RM4500 or a married couple with 2 kids a minimum of RM6500 in order to have somewhat of a quality of life month to month.

Of course, some people will suggest this should only apply to large cities like Kuala Lumpur, Penang and perhaps Johor Bahru but they tend to always forget the cost of living in Sabah and Labuan for the most part is actually significantly higher than Kuala Lumpur as the cost of goods and essentials are more expensive and rentals for homes, and apartments are similar to Kuala Lumpur prices, no matter where you choose to stay.

As you will note with just about any data that comes out of the federal government, their data tends to be flawed (on purpose?) because it’s always Kuala Lumpur that remains a bench mark for comparison when in fact, separate data should be produced for Kota Kinabalu, Kuching, Penang, and Johor in comparison to Kuala Lumpur because it does not always reflect the true realities of living in one of those cities other than KL.

In 2017, the Federation of Malaysian Manufacturers (FMM) released a press statement in which they “strongly recommend” that the current minimum wage rate at RM1,000 for Peninsular Malaysia and RM920 for Sabah & Sarawak should be maintained in the medium term given that the industry is (was) facing hefty increases in the cost of doing business. Any increase in the immediate term should be deferred.

FFM represents factories and industries who employ mass labour for production purposes so their cost of employment would be significantly higher than say, a small retail business or a small SME. A change of RM500 per person would reflect significant changes in operational costs and would in turn affect, potentially, the cost to produce products or goods.

However, what the FFM does not comment on is how much profit each of their members makes on a per annum basis from the labour intensive work done by, in my humble opinion, underpaid labourers who earn the minimum wage but NOT a fair wage or a living wage to enable them to live a decent life with dignity. This however does not take into account possible income from overtime or from special incentives paid or from bonuses paid during festive seasons so these additional incomes could make some minor changes to the annual income of an employee.

But what is scary to me is that whilst industry is prepared to keep minimum wages down to the minimum, they are not interested in a fair wage or a living wage for employees and this maybe, needs to be addressed.

A rested employee who works the minimum 10 hour shift per day may see significant increases in productivity levels that justify paying a living wage over a minimum wage in the long term as the employee is happy to be earning more than the minimum wage and may feel his or her contributions are being rewarded via a living wage income per month.

According to FFM in 2017, “the call by several parties to raise minimum wage from RM1,000 to RM1,500 for Peninsular Malaysia is an excessive increase compared to the Government’s more reasonable and gradual increase of RM100 or 10% in July 2016. Any increase to the rates must be gradual and cannot be drastic.”

“Minimum wage at RM1,500 is too high a basic wage especially for unskilled workers and new entrants to the job market. In manufacturing, workers are paid allowances on top of basic wage. Take home pay is higher than minimum wage. A high basic wage affects overtime, increments and bonus payments. There are also knock-on effects on wages across-the-board, all of which could force companies to restructure, including possibly reducing employment opportunities, to address the strong wage push and spiralling costs of doing business.”

Based on the Department of Statistics (DOS) Salaries and Wages Report 2016, released in July 2017, the manufacturing sector employed 1,198,300 workers at an average salary of RM2,129 a month. A RM500 increase in basic salary across-the-board means an additional labour cost of over RM599 million a month for manufacturing and RM6.8 billion a month for the overall economy (RM500 x 13.6 million total employment (excluding public service) based on DOS Labour Force Survey 1H2017 published in the Economic Report 2017/2018). The average salary of plant and machine operators is also already at RM1,662 per month. At RM1,500, Malaysia would have the highest minimum wage rate in ASEAN (excluding Singapore).

According to FFM, “minimum wage must commensurate with productivity gains. The more important focus is to ensure wages is in tandem with productivity growth, as well as differences in cost of living and economic activity between states and zones, as provided in the NWCC Act and practised for private security guards. Raising the minimum wage rate in a drastic manner could worsen huge outflows of foreign exchange through workers’ remittances, which is also of concern to the Government.”

So, what do we do? Enforce a minimum wage level that ensures a Malaysian remains below the poverty line or do we increase the minimum wage up to a fair, and decent level that promises the individual will be paid a fair amount so they can live in dignity? 

An increase of the minimum wage to RM2000 would be equivalent to Singapore Dollars $670 per month, and to be fair, is not a massive increase in wages for corporate companies and labour intensive companies who say they are already paying over RM2,000 on average in wages as it is with overtime and incentives. 

If they are already paying over RM2000 per month, then they should not be challenging a minimum wage increase of up to RM2,000 per month all across Malaysia for all Malaysian’s if it actually benefits them, the economy and increased spending within our borders.

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