The government should know better than to declare the end to “government knows best” but then flash a megaproject pageant that we are supposed to agree upon because the government says it’s good for you and me.
The lack of government knowing better is not confined to the hot button topics like the Warisan Merdeka tower only. The formation of a National Wage Consultation Council — before any debate or passage of laws that establish its existence — is another example.
The government has stated that a bill will be tabled in parliament in March next year along with an amount approved by the cabinet. The minimum wage could be implemented from June or July. But shouldn’t these dates be determined by the yet-to-be established council? Moreover, if the council is formed and cabinet endorses a minimum wage amount in the same month, what exactly is the role of the council? Will it consult members in the same way that the rakyat were consulted in drafting the budget?
The Malaysian Employers Federation (MEF) thinks the council is a good idea. The MEF has been the most strident opponent of minimum wage. The response from the Malaysian Trade Union Congress, on the other hand, has been guarded and tepid, and legitimately so. Organised labour’s leeriness towards government overtures on minimum wage is grounded in five decades of broken promises.
If we are going to do minimum wage, let us do it right. For a start, do not name this prospective body the National Wage Consultation Council. There should be more discussion if the body should be in the form of a council or an independent commission. Tentatively, it should be referred as the minimum wage setting body.
Let us also adopt a global perspective and consider the experience of countries that have implemented them before us. We ought to examine minimum wage setting bodies in high-income countries, especially recent entrants like South Korea and Poland.
There are three crucial elements that determine the fairness and efficacy of a minimum wage setting body. First, who will chair it? An independent person or the minister of human resources? Various national councils are also chaired by the prime minister. If so, then political considerations will inescapably come to bear. The extent minimum wage reflects national opinion will hinge on the level of democratic maturity. So it is probably not a good idea for a politician to chair the body.
Second, and related to the above, will it operate independently or under the supervision of the ministry? We owe it to low-wage workers and employers to consider establishing an independent commission to determine minimum wage and to operate without influence of government, though of course with due incorporation of government policy objectives.
We should take a good look at the UK’s Low Pay Commission, which produces detailed annual reports and recommendations, or South Korea’s Minimum Wage Council, which comprises equal numbers of representatives of employers, employees and independent persons — no government seats.
Third, will it set the minimum wage or make recommendations to the government? In most countries, the minimum wage setting body makes recommendations but the government ultimately decides. In some countries, the relevant council, commission or committee determines, directly or indirectly, the legally binding wage floor.
If two-thirds of South Korea’s Minimum Wage Council approve a minimum wage increase, the minister of labour is obligated to accept the proposal even if he or she disagrees.
Poland’s Tripartite Commission operates on the principle of consensus, and once that is reached, a new minimum wage becomes law. If consensus fails, the government still cannot implement minimum wage below the commission’s proposal.
We should approach these questions from the standpoint that, since minimum wage is principally about fairness, we must strive for the fairest mechanism. Start with the case for a fully independent commission that determines the wage floor and work out compromises from there.
We must establish this body first, then let it deliberate parameters and mechanisms for setting minimum wage, then only set the rate. Whether we have a national rate or regional variations should also be up to the body to decide. These discussions take time and energy, but if the government is sincere and fully committed about minimum wage, a thorough and strenuous process is right and necessary.
Rushing the creation of a national wage consultation council and a cabinet-stamped minimum wage guarantees premature birth. Worse still, we might institutionalise mechanisms as ineffective and powerless as the wage councils that have been in existence since the Wage Councils Act of 1947.
The government should know better than to let minimum wage, a vital instrument in our quest to reduce poverty and raise incomes, fall victim to rash policy.
This article was first published in The Edge (November 4, 2010)
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