SQUEEZE 'EM TILL THEY SQUEAL
1. Many of us are frustrated and angry that our income does not commensurate the rising cost of living, especially those of us in the urban and con-urban areas.
2. Adding salt to injury, our Federal Government is reducing its subsidies. Government-linked companies are also raising electricity tariff and toll rates. and then we will have GST in 2015. Ouchh…where are we going to find the money? The pay we receive remains the same.
3. We have to remind ourselves that the public sector only employs 1.2 million of our 30 million population. The rest is employed by the private sector. The private sector is divided into two – the GLCS and the 100% private sector that is owned by wealthy private individuals.
4. For the GLCs, they are now one of the better paymasters with their salary schemes, on the average, being above market.
5. The Government wants to enforce the minimum salary scheme but it has received loud protests from the 100% private sector. Other than legislation, the Government is powerless concerning pay scales within the private sector – it is a matter of private contractual arrangement between the employer and the employee.
6. As such, what is the Government’s strategy for the medium and long term to resolve this thoroughly vexing problem?
7. For the longer term, the Government is working very hard to uplift our economy to that of a high-value economy, a high-income economy. Nevertheless, the opportunity for those with lesser skills and knowledge may very well be limited. This is a fact.
8. For the medium term, in my personal opinion – the Government is deliberately pursuing “Squeeze ‘Em Till They Squeal” policy.
9. What does this Strategy mean?
10. The Government will gradually increase the general cost of living (but reduce percentage of payable income tax and distribute BRIM to lessen the burden somewhat) until our workforce squeal to their employers, demanding higher pay.
11. The critical catalysts for this virtuous cycle are 100% private sector companies that are capable and willing to pat higher salaries. As such, there will be movement of employees from low-income companies to higher-income companies. This is already happening but will get more critical as costs of living creeps up.
12. Companies that pay non-competitive salaries will sooner or later realise that for them to continue their business, they have to be better paymasters.
13. In the years ahead, our economy will move to a predominantly service economy, not manufacturing. Even now, our service economy is already contributing 54% of the nation’s GDP. This number is estimated to increase to 65%-70% by the year 2020.
14. In a service economy, the most important input is talent. The demand for qualified talent will increase and may even be critical in a number of industries.
15. Adding to the above-stated dynamics, the continued rise of commodities and raw materials will force our manufacturers up their value-chains. They have to be more sophisticated in their output. They will be forced to have their eyes prised open, bite their fingers and pay-out better salaries in order to attract talent.
16. It is not easy to raise the salaries of an entire economy. But this Strategy is about the only way we can persuade our 100% private sector companies to pay competitive salaries. Otherwise, they will continue wanting to preserve their profit margins and dividend pay-outs as it have been in past decades.
17. Yes, we will hurt, especially those of us in the middle-income sector but insya’allah, God willing, our children and our grandchildren will reap the benefits of our pain.
Saiful Bahari Baharom
[Economy and Business]
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