Wednesday, April 22, 2015

BR1M is not all bad


Two days ago, Tun Dr Mahathir Mohamad said he is opposed to BR1M because it gives an impression that Malaysia is a backward country and a country that is not successful. Instead, Malaysia should increase job opportunities so that the people can find work rather than depend on the government. BR1M, said Dr Mahathir, is a form of bribery.

BR1M pales in comparison to what Britain spends on the welfare of its citizens, which is more than RM1,300 billion on social security and national healthcare alone. However, we would not say that the UK is a backward country. The issue here is not that Malaysians do not have jobs like in the UK where about two million people are unemployed. In fact, because of the shortage of labour, about 20%-30% of Malaysia’s work force is ‘imported’.

The real problem is, unlike in the UK, Malaysia does not legislate and enforce a minimum wage law so more than half Malaysia’s working population survives below the poverty level where many earn less than RM1,000 a month. Even then this would depend on what you regard as the poverty level, whether it should be RM1,200 or RM2,000 a month.

Therefore BR1M is not really to help the unemployed as much as to help those employed but earning a salary that is too low and is not sufficient to cover the cost of living.

One alternative to BR1M would be to set the minimum wage at RM1,200 per month and to pass a law that employers who pay their work force anything less than that can be arrested and charged in court. But then the cost of goods and services would definitely increase and it would make Malaysia uncompetitive compared to the neighbouring countries.

The problem with putting more money into the pockets of Malaysians by enforcing a minimum wage law would be that inflation would set in. The cost of goods and services will increase and this increase will invariably be passed back to the consumer. Therefore there is no best solution but merely a solution of the lesser of the two evils.

BR1M, therefore, helps put more money into the pockets of the needy without actually increasing the costs of goods and services via legislated salary increases such as minimum wage laws. This is still a better option than gambling with inflation.

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