Jakarta’s demand for minimum wage legitimate

Joe Fernandez
Aug 10, 10


COMMENT The Human Resources Ministry has had to finally tell the public that Malaysia’s memorandum of understanding (MOU) with Indonesia, as it now stands on the recruitment of domestic help from that country, may be a non-starter.

The ministry needs a rap on the knuckles for waiting so long before reluctantly raising the subject – no great secret anyway – in public

Indonesia wants maids recruited from the republic to be paid a minimum RM800 per month. It is presumed that skilled and experienced maids would have to be paid more. Otherwise, no deal, according to Jakarta, with no reference whatsoever to any Minimum Wage Act.

domestic maids 070606 child careThe RM800 per month is the minimum that Indonesia is willing to accept for its workers in Malaysia but only for maids since these have board and lodging. Hence, they can save quite a bit of their monthly salaries to remit to the family and even set aside something for a rainy day. Anything less will be unattractive as a ‘hand-to-mouth existence’.

Jakarta has taken the right stand on the issue. The issue is not a Minimum Wage Act, as Human Resources Minister Dr S Subramaniam would have us believe. The issue is minimum wage.

However, the minister thinks he was right to reject the Indonesian demand based on the premise that ‘Malaysia does not have a Minimum Wage Act’.

Furthermore, explained the minister, Putrajaya wants to leave it to the market forces of supply and demand to dictate wage levels. He hopes to persuade the Indonesians “to see reason” and accept the much lower wage level being proposed in the MOU in line with “market forces”. This is probably anywhere from a measly RM400 per month to a still measly RM600 per month.

The minister is willing to consider paying something more, but not RM 800 per month, for experienced and skilled domestic help.

It is interesting that he should cite the economic factors of supply and demand setting the price mechanism. In that case, why have controlled prices for a basket of goods and provide subsidies to consumers and the business community?

Labour market distorted

The main reason why supply and demand factors cannot be used, as advocated by Subramaniam, is that the federal government has deliberately distorted the labour market in Malaysia by allowing in the unregulated inflow of foreign workers.

sabahWhile many come in legally, even more come in via the backdoor because of crippling fees. These are allowed to stalk the land as if they own it – and nowhere is this truer than in Sabah where there are 1.7 million foreigners vis-à-vis 1.5 million Sabahans.

Human trafficking, people smuggling, white slavery and unreasonable demands by labour recruitment agencies, further compound the picture.

Had not illegal immigrants been an economically distorting factor in the labour market, probably the argument that supply-and-demand factors should dictate wage rates can be considered. If these are considered too high to ensure the competitiveness of the business community and the economy, the government would be duty-bound to bring in a Minimum Wage Act.

Hence, the Minimum Wage Act is a sword that cuts both ways to ensure that wages are reasonable – not too high when illegals are not around and not too low because illegals are running amok in the country.

The Indonesian government can be expected to stand its ground on the maid issue. Indonesia, like Vietnam, is doing economically very well. Foreign investment is pouring in and local wage levels are rising.


oil palm plantationFor example, Malaysian-owned plantations in Kalimantan are paying more than the oil palm estates in Sabah for all kinds of labour. Already, the trek back home has begun.

Also, there are other countries that are willing to recruit maids from Indonesia. Besides Hong Kong and Singapore, these include countries in the Middle East and smaller pockets of demand elsewhere.

So, it’s not a must that Jakarta must kow-tow to Putrajaya on the maid issue.

Genteel poverty

Whether households in Malaysia can afford to pay RM 800 per month for a maid from Indonesia is a different issue altogether. Clearly, many would find the wage rate more than a little difficult to swallow since they themselves are underpaid and overworked. They live in genteel poverty. Meanwhile, the rich are getting richer and this includes the politicians in government.

This brings us to the issue of why Malaysians themselves are not paid better. A recent Human Resources Ministry survey found that the wage rates of 34 percent of Malaysians are below the poverty level. This makes nonsense of federal government claims that the poverty level in Malaysia, especially Peninsular Malaysia, has been dropping all the time and is now in the lower single digits.

One reason why Malaysians are so poorly paid is the presence of the illegal immigrants.

NONEAnother reason is the level of official corruption in Malaysia which sees government procurements and projects costing twice, three times or even up to 10 times what it should cost the taxpayer. The result can be seen in a comparison of the prevailing wage rates in Malaysia and Singapore for government servants and the National Debt Burden.

The third reason is the unwillingness of the ‘beggar-thy-neighbour’ business community to share the economic pie with their employees, shareholders, investors, consumers, the community and the government. This can be likened to criminal, and senseless, hoarding of money and wealth and equally criminal exploitation of people.

If Indonesia can secure the RM800 per month for its maids in Malaysia, other workers from that country can accordingly stand to benefit. These would have to be paid what should ideally be a minimum wage for Malaysians themselves. There are blessings in this for Malaysians as well.

Ideally, no Malaysian worker, no matter how unskilled, should be paid less than RM2,000 per month. Of this, 15 percent should go to the Employees Provident Fund. Employers should match this demand.

The onus is on employers to make the local labour market worthwhile by making training available and increasing productivity.

Inflation will not rise if Malaysians are paid better as long as consumers are better educated to stand united in the face of unscrupulous profiteering.



JOE FERNANDEZ is Malaysiakini’s Sabah pointman who feels compelled to put pen to paper when something doesn’t quite jell with his weltanschauung (worldview). He readily admits that there’s a demon in him at times, urging him on.

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