Malasyia Implements Minimum Wage

Story first appeared in The New York Times.

At construction sites, plantations and factories, millions of low-income workers across Malaysia are set to receive a pay raise. Washington DC Labor and Employment Lawyers say that this is a huge step and improvement for the country.

About 3.2 million such workers are expected to benefit from the newly announced introduction of the country’s first minimum wage, part of the government’s plan to transform Malaysia into a high-income nation.

But reactions to the government’s decision to introduce a minimum wage varied Tuesday, with one economist dismissing the move as an election gimmick designed to appeal to workers before voting that many expect could be held as early as next month.

The minimum wage will be set at 900 ringgit per month, or $297, for workers on the Malaysian Peninsula, and 800 ringgit for those in the states of Sabah and Sarawak, on the island of Borneo, Prime Minister Najib Razak said late Monday, in announcing the details of the new legislation.

The lowest-paid will now be guaranteed an income that lifts them out of poverty and helps ensure that they can meet the rising cost of living.

The number of countries and territories in the Asia-Pacific region that have some form of minimum wage has grown in recent years, and now includes Cambodia, Hong Kong, Indonesia, Thailand and Vietnam. In some places, the minimum wage covers all workers, while other places have set minimum wages for specific regions or industries.

The Malaysian government is seeking to transform the country into a high-income nation by 2020, which would require the average annual income to rise to the equivalent of $15,000. Last month the per capita income had increased to $9,700 a year, up from $6,700 two years ago.

Most companies will be required to begin paying the minimum wage in six months, although companies with five workers or fewer will be given 12 months to comply.

Foreign workers will be entitled to the minimum wage, but it will not cover workers in the domestic sector, like maids and gardeners.

The union had been calling for a minimum wage for more than a decade. While the union initially asked for the minimum wage to be set at 1,200 ringgit a month, he said it had later revised its demand to 900 ringgit in an attempt to reach a compromise with the government and employers.

However, the opposition Socialist Party of Malaysia had called for a minimum wage of 1,500 ringgit a month. The party, which held a rally in Kuala Lumpur on Tuesday, criticized the government for not introducing the new rates immediately and said in a statement that it was discriminatory that there would be different rates for workers in different parts of the country.

The prime minister has said that the different rates were a reflection of regional variations in salaries and cost of living, according to news reports.

Employer groups say that paying the minimum wage would reduce companies’ profit margins and that some companies with five or fewer employees could be forced out of business.

It’s a big challenge is because the new rates are not really premised on increases in productivity or performance. This is a cost factor that has to be borne by employers, which eventually will affect their competitiveness.

Some companies might have to increase wages by as much as 100 percent. For instance, he said, some plantation workers in Sabah are currently paid about 400 ringgit a month, but that would increase to 800 ringgit under the new wage structure.

A professor in the economics faculty at the University of Malaya, said the introduction of a minimum wage could increase the cost of exports if companies passed the extra cost onto their customers.

The 900-ringgit monthly wage would be more significant for workers in rural areas than those in urban centers like Kuala Lumpur, where the cost of living has risen steeply in recent years. He added that in Malaysia, the rural vote is what puts the government in power.

There has been much speculation that a national election could be held in June, although the government has until April 2013 to hold the vote.

It was recently announced that civil servants would receive a pay raise and gave families earning less than 3,000 ringgit a month a one-time payment of 500 ringgit, a move expected to benefit four million households.


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Incomes Fall in most Metro Areas

The Wall Street Journal

 

 

Personal incomes fell across the U.S. last year except in areas with a high concentration of federal government and military jobs, the Commerce Department said Monday. They declined most in places with a lot of housing and finance jobs.

Among the 52 metro areas with populations of more than one million, in only three did both net earnings and the broader measure of personal income both rise.

All three had strong ties to the federal government: the Washington, D.C., area and two areas with a large military presence, San Antonio and Virginia Beach, Va. In all three, the biggest gains were among workers in the federal government and the military; private sector compensation fell.

The same picture was reflected nationally, as private employers froze and in many cases reduced workers' pay and hours.

The only other big metro areas with rising personal incomes—Baltimore and Pittsburgh—had falling net earnings but a sharp increase in government checks, such as unemployment benefits.
There are myriad sources of personal income, the largest being wages and salaries that accounted for just over half—some $6.3 trillion—of U.S. income last year. The balance comes from a combination of investment income like rents and dividends, as well as government payments such as Social Security and disability benefits.

The new data offer the most detailed, ground-level look at the impact of federal government employment and spending last year, highlighting those parts of the country that have received the most benefits and those that have been hit hardest by the drop in private employment. The support of government was reflected nationally last year, with private wages falling 6% in 2009 as government pay rose 2.6%.

Even in the bright spots, gains were only relative. Many of the best-performers had a strong government presence whose workers were less susceptible to the ups and downs of the economy. In other places, the influx of federal transfer payments kept incomes from falling much further than they would have. "It shows the role of federal support programs in helping offset the loss of wages," said Steven Cochrane, an economist at Moody's Analytics.

Among all of the Census Bureau's 366 metropolitan statistical areas—collections of cities or counties that are economically tied to an urban core with at least 50,000 people—personal income declined in 223 areas in 2009. It rose in 134 areas and was unchanged in nine, before adjusting for inflation. The biggest percentage decline in per capita income—8.4%—was in Midland, Texas, where incomes fell with oil prices last year.

Among the 20 areas where per capita personal income fell furthest, six were in Texas, where declines in energy prices slowed oil and gas drilling activity. Still, Texas has fared much better than the rest of the country through the recession and recovery, in part because resource jobs have buoyed employment, especially as oil came off its recession lows through this year. The unemployment rate in Midland, for instance, fell to 5.9% in June from 6.8% in June 2009. The national unemployment rate is 9.5% today.

Among the 134 metro areas that saw personal incomes rise, most of the gains were from big jumps in transfer payments, the Commerce Department said. In the 57 places where earnings increased, many are home to soldiers whose wages are unaffected by the economy. Among the 10 metro areas with the largest personal income growth, seven had a strong military presence, among them Jacksonville, N.C., which houses the Marine Corps' Camp Lejeune and Fayetteville, N.C., home of the Army's Fort Bragg.

In only five metro areas—Kennewick, Wash.; Cumberland, Md.; Morgantown, West V. Va.; Cape Girardeau, Mo.; and Ithaca, N.Y.—did the private sector account for more of the earnings growth. Those gains also had a government component.

The Kennewick area has received a flurry of stimulus money to clean up the Hanford nuclear waste site, some of which flowed to local firms. The other four have either a strong presence in either the heath care or education sectors, which remained the two strongest sectors through the recession. New York City and the Bridgeport-Stamford Connecticut, both leaders in finance, are still among the richest metro areas in the country but saw big declines amid falling bank bonuses last year. Per capita income fell 4.6% in the New York metropolitan area.Bridgeport-Stamford, a hedge fund hub known locally "Wall Street North," remained the country's richest metropolitan area—with per capita income of $73,720 despite a 6.8% decline from a year ago.

Some of the biggest year-over-year personal income drops were in major metro areas in Nevada, Arizona and Florida, which have all seen steep declines in housing prices—and where unemployment is higher than the national average. Nevada's 14.2% unemployment rate is the nation's highest.

Other hard hit areas included several in the industrial Midwest, which saw a precipitous decline in manufacturing jobs in 2009, leading to income declines.

In the Elkhart, Indiana metro area, for instance, per capita income fell 6.5%, the eighth biggest drop in the nation. The area—where unemployment is 17.8% —also saw a 21.4% rise in transfer income, the biggest jump in the nation.

The metro area with the second-highest per capita income was San Francisco, with $59,696. Those with the lowest were McAllen, Texas ($19,720) and Brownsville, Texas ($21,756).