Governing for the precariat

For Malaysia to hold its social fabric coherently, and, more narrowly, for the Unity ticket to win the 16th General Election, economic policies must be shaped to result in general prosperity from the bottom up. A clear economic message has emerged from the recent six state elections: the nation’s precariat class voted against the economic establishment.

Precariat is a combination of the words precarity and proletariat.

Who are the precariats and how large they are as an economic segment?

According to the Employee Wages Statistics (Formal Sector) Report, a new quarterly report that the Department of Statistics recently launched, of the 16.02 million labour force, 15.38 million are employed; of whom 12 million are paid workers and 2.3 million self-employed, with 487,000 unpaid family workers and 532,900 employers.

Of the 12 million paid workers, 10.5 million are citizens, 1.5 million are non-citizens. Presumably, the labour force also includes many more undocumented non-citizens who are employed one way or the other. Of the 10.5 million citizens-workers, 61.4% or 6.45 million are employed in the formal sector.

Precarity comes in the following ways:

As indicated by the Report, those employed are generally paid very low. A total of 34.8% of formal sector employees earn below RM2,000 per month in March 2023. Even with a very impressive 27% increase compared with March 2022, the bottom 10% of those in formal employment earn wages less than RM1,482 per month.

The general low wage situation is affecting even the top, at the 80th percentile, wages are at RM5,500. In other words, 80% of citizens who work in the formal sector earn less than RM5,500. The classification of M40 is often ridiculed by those in the category because they too suffer, and suffer miserably.

For those advocating the reintroduction of Goods and Services Tax (GST), think carefully. Wages at 70th percentile is RM4,000, i.e. 70% of Malaysians who work in the formal sector earn less than RM4,000 per month. Taking into account exemptions and deductions, a Malaysian worker is usually only eligible to start paying income tax when his or her income reaches RM4,000 per month.

Even after significant post-Covid-19 wage rises in 2022, 70% of Malaysian citizens who work in the formal sector do not earn enough to qualify themselves to pay income tax. Reintroducing the GST means imposing a tax burden on the precariat, which is a sure way to invite a revolt. A “social contract” between the government and the governed should be such that one is only taxed when he or she is earning sufficiently beyond subsistence.

The other side of the coin of this Report is that there are 38.6% of Malaysian citizens employed outside of the formal sector. They are mostly in gig works or other forms of informality, which sometimes may bring higher income but with no certainty at all. P-hailing drivers and food delivery riders that I talked to personally told me they are working 14 hours or even more each day just to make ends meet, and they are trying to earn at least RM4,000 per month. A survey shows that 35% of gig workers are graduates while another one indicates that after 10 years of graduation, 68% of graduates earn less than RM4,000 per month.

Not all among the 2.3 million self-employed are doing well. And, there is another form of precarity often hidden from the Malaysian statistics. Each day at 5am, more than 50,000 Malaysians are on motorbikes leaving Johor Bahru to work in Singapore as cheap labour, mostly earning a monthly wage of less than S$2,000.

While that S$2,000 may look significant in Ringgit, many of them are employed in positions held by unskilled foreign workers in Malaysia, such as security guards, factory workers, cleaners, truck drivers, etc. Most of those I have personally talked to informed me they would stay home in Malaysia if they could earn two-thirds of Singapore’s pay, and not one-third that is being offered in Malaysia’s job market. Many Malaysians working as fruit pickers, cleaners or construction workers in South Korea, Australia or New Zealand are also in such precarity.

Precarity is the result of decades of lopsided economic policies that failed to lift the wages of ordinary Malaysians while the entire economic structure is stuck in a vicious cycle of low wage, low productivity and low technology adoption. Precarity harms the long-term wellbeing of millions of Malaysians, both when they are working and when they retire in the years to come.

The situation would not change overnight. However, posturing as the economic establishment means the Unity ticket was forced to shoulder the anti-establishment sentiments of the precariat, especially the younger ones, during the 6-state elections.

Recognising precarity and acknowledging that jobs and pay is front and centre on the minds of Malaysian voters would be a fresh start.

Successive Malaysian governments have somehow accepted the idea that the government must act as the HR Department for private investors, especially global capitals. Decades ago, the Labour Ministry was renamed “Ministry of Human Resources”.

To deal with precarity, which is both an immediate political economic problem and as well as its potential of harming long-term social cohesiveness, the government should see its primary function in the economy as to create economic activities that would generate sufficient formal employment with decent pay for Malaysian workers.

The government will still need to be very friendly to investors. The difference is that the objective of attracting investment is to create good jobs and not just investment for investment’s sake. This is not new. When Malaysia began its journey of export-led industrialisation in the early 1970s, each job that was created in the export sector paid way more than any formal employment available in the country at that time for those with the same level of education qualification and competency. The New Industrial Master Plan 2030, which will be launched by the Prime Minister soon, will address some of these concerns.

Those who argue that the influx of foreign workers do not hurt the wages of Malaysian workers should know that their arguments do not stand the test of evidence. A race to the bottom has been created because of the decades-long influx of cheap and unskilled foreign workers.

There will have to be political will to implement a Multi-tiered Levy System for unskilled foreign workers. The more foreign workers a firm hires, for each of the foreign workers the levy would be higher. And a schedule of five or ten years of annual steep hike of levy for big corporations that hire more than, say, 3,000 foreign workers should be announced at the onset. At the same time, smaller firms that hire less than 100 foreign workers will be given moderate hikes as transition for these firms would be harder.

To ease and to help corporations to reduce dependency on unskilled foreign labour, the government will have to do a lot more in supporting and providing financial incentives for firms to “TechUp”, adopting automation, digitalisation and as much technologies as possible.

When Prime Minister Datuk Seri Anwar Ibrahim visited Indonesia in January, he was asked at a dialogue session why he was still coming to Indonesia to talk about recruiting Indonesian workers to work in Malaysia and why wasn’t Malaysia thinking of investing in Indonesia to tap into its cheaper labour.

Malaysia will need a new mindset. For sectors which require cheaper labour, the government should help industries to relocate to cheaper destinations from major cities within Malaysia, and to cheaper destinations in Southeast Asia. Malaysia doesn’t need to compete with Vietnam, Indonesia or Thailand, which all have demography dividends.

Malaysia should foster a relationship of vertical integration with these economies in which Malaysia firms invest there to tap into cheaper production costs while linking these production sites seamlessly into a single Southeast Asian supply chain. Through which Malaysia departs from low cost production and moves into higher value-adding activities, and generates higher wages, while helping our neighbouring countries to prosper together.

Jobs will have to be refashioned. For instance, security guards that currently are the domain of unskilled foreign labour who more often than not can’t make a police report or explain a crime scene due to language barriers should be transformed through introduction of gadgets and technology to reduce the number of workers needed while turning these jobs into positions that pay RM3,500 or even more, especially those who has qualifications.

Skill development such as TVET should be a priority for the nation. No one should need to borrow a study loan to do skill development. Currently, not only university students are burdened with debts. Even those who study vocational training had to borrow to study yet not guaranteed with a decent pay.

In some jobs, the government just has to step in to push for higher wages. When I was 14 years old in 1991, I worked as a waiter at a cafe in Subang Parade with a pay of RM2.50 per hour. A year later, due to a very tight labour market and with some experience gained, I was paid RM4.50 per hour. Three decades later, almost all fast food chains pay workers less than RM10 per hour. This is simply unacceptable. Imagine major fast food restaurants pay young workers RM20 per hour, many university students would find it worthwhile to work some hours each week to support their studies. There won’t be hunger or constant dependence on instant noodles for our university students, which always pains me.

We need solidarity between those who hire and those being hired. The government should facilitate that enhances the sensibility, empathy, and solidarity among the haves and the have-nots.

In the meantime, policies should be geared towards making available affordable public transport, good healthcare, and decent rental housing in the major cities. Remember, 80% of Malaysian citizens in formal employment earn less than RM5,500 per month. Expecting them to own a car, or own a house however “affordable” it was, or face life’s calamity when illness hits, only adds to precarity. To reduce the mental state of economic precarity is, in part, to have more assurances through sound public policies and public provision of high quality services.

If the 6-state election results could prompt a major shift in economic thinking of the government to reverse the precarity caused by decades of economic policies that failed the ordinary folks, with the government taking a reformist stance to create general prosperity from the bottom up, the Anwar-led Unity Government will have a chance to herald a new political and economic order that will last beyond election cycles.

Liew Chin Tong

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