Saturday, September 18, 2010

FMM minimum income RM700.. Pakatan RM 4000...where is the logic ?

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has proposed that the minimum wage level should use RM700 as the median benchmark.

Well, the best part of course our good old opposition's proposal to have RM4,000 income as a policy...

Aug 19, 10

Parti Keadilan Rakyat (PKR) is targeting a minimum household income of RM4,000 a month within five years of a Pakatan Rakyat federal administration, its de facto leader Anwar Ibrahim said.

Now... there's a slight definition difference between the two. One is absolute individual salary but household income could mean a combination of multiple individuals, which I presume the basic assumption is husband and the wife.

Ask any given man on the street. 99% will always request for salary increase. It's natural. Who doesn't like a policy maker who can give you more ??? But the implication is not as simple.

Simply raising salaries means you are adding fix cost. By doing that, business may need to relook at their business model if the additional fix cost means alot... that affects cash flow, profitability and many things ... of course this is also subject to size of organisation, organisations that are cash rich may see those additional fix cost as a drop in the ocean but how many organisations would be so generous to do that if they had not been doing that now ?

I guess, another impact it would be behavior . Let's start with the behaviour of employer, with additional of fix cost , he would at least some level of additional productivity. But, will that productivity also increase too ??? If not, it will be another sunk cost with no additional productivity...

What if some companies see that cheap labour as a competitive edge, by removing that, would the companies rethink their strategy ? Worst scenario, job loss.... yeah, those are extreme scenarios...

Ok... it's diverging a lil too far. Now, what is the basis of minimum and how do you set it ? National poverty figures and rates ? Shouldn't job value determine by demand and supply ? If the job is priced too low and nobodies is willing to work for it... it would naturally force it to pay more than the previous to attract people for it ?

The fact that low wages and you have people willing to work for it is somehow an economic match of demand and supply already. OK, obviously there's another camp who is going to argue the wages are not enough to live decently... but isn't the argument of improving one's productivity would help one to get a better wage holds ?

If expectation of higher wages increases productivity, should higher productivity also led to higher wages ???

The good and bad thing of a policy implementation of minimum wage is it achieves the minimum wage but does that also mean high competitiveness ? No job loss ? Less bonus to balance the cost ?

It'll be real funny if this forces employers to invest more in machines which are normally more expensive and remodel their manpower needs. That would be an irony.

Rite, for Pakatan's RM4,000... it is most attractive, not knowing how this statement will capture how many votes out there but how do make it RM 4,000 household income ?

If the husband earns RM 3,000 and the wife earns RM 1,000.... that equates to RM 4,000 household income .... does this count ?

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