Sunday, October 13, 2019

Part 1 Some Notes On The Budget - Minimum Wages, Rural Unemployment, Unemployed Graduates, 90 Day Maternity

Two things have killed the Malaysian economy. The first was the 6% GST which gave the economy a coronary heart attack. The economy has still NOT yet recovered from the 6% GST that was imposed in 2014. Those of you who do not run businesses will not know what I am saying. 

The other thing that has effectively killed the economy are the Minimum Wages. It began at RM900, hit RM1,100 and now the Minimum Wages have been raised to RM 1,200 beginning January 2020. 

Then there is more confusion - RM1,200 Minimum Wages in major cities. What is a major city? Is this a legal definition? How do you define a major city? By population numbers? By economic output? What about small cities?

Kota Bharu is a State capital with about 150,000 to 200,000 people. A major city. But economic output is three buffalos and a tok guru per acre. So minimum wages RM1,200 or no?

Kuala Selangor is a small town, smaller population - not a major city at all, but almost every bank in Malaysia has a branch there. It is a rich small town. So Minimum Wages RM1,200 or no?

Because of Minimum Wages the unemployment rates have gone up. Do you seriously want to pay the SPM dropout Mat Motor RM1,200 a month? For doing what? There are SPM school leavers who cannot even write their names and addresses properly. They also get paid RM1,200?  If you do not run a business you will not understand what I am talking about.

Folks, in the Sarawak interior the  'sustainable' wages for workers (factory workers, plantation workers etc) does not exceed RM600 a month - UNTIL TODAY.   Because of Minimum Wages, plenty of employers there are hiring 'walk across the border' workers from Kalimantan. So unemployment among other Sarawakians who are looking for Minimum Wages of RM1,100 has increased. This is what I heard from Sarawakian people who run businesses.   Sarawakians please feel free to say otherwise.

That is why there are over 250,000 school leavers who are unemployed in the rural areas and in the small towns (according to Murray of Asia Sentinel). The vast majority of them are Malay kids. Now they are turning to drugs, ecstasy pills, video gaming, watching porn and all sorts of other life wasting habits. They cannot get jobs because the economy cannot afford to pay them RM1,100 or RM1,200 for ANY job. 

Wage increases must be preceded by productivity. It cannot be announced by the Finance Minister in his Budget speech. Let me share a 'narrative'.

Lets take the Milo factory as an example. The Milo factory was running on three shifts and selling all the Milo they could produce. Lets say they produce 50,000 tins a week. The workers were earning a salary. Then suddenly they get a Minimum Wage imposed salary increment. The workers are happy they get more wages. 

The workers also like to drink Milo especially Milo Ais which is about RM2.50 in the kedai mamak. Because they are now earning higher Minimum Wages the workers also drink a few extra glasses of Milo Ais each week. 

The same thing is happening all over the country. Since all workers got a sudden raise in their Minimum Wage salaries, they all start drinking extra Milo Ais every week. The demand for Milo goes up.  Soon all the kedai mamak restaurants are calling the Milo factory and ordering extra cartons of Milo. They need 70,000 tins of Milo per week now.

But the Milo factory manager says "Sorry I cannot deliver extra Milo to you because although my workers are getting paid extra, they are not producing extra. My factory is already working THREE full shifts a day. We can only produce 50,000 tins a week."

So the workers' productivity remains the same.
They still produce only 50,000 tins of Milo each week.
But their Minimum Wage salaries have increased, because the Minister of Finance said so.
This has created a 'non-productivity-growth-driven' incease in demand in the economy.

Two things will happen:

No 1. The price of Milo will go up. This is a certainty. The Milo factory manager will say 'I only have 50,000 tins a week. You want 70,000 tins. Hmm . . very interesting. So how much extra can you pay?"

Say the price of Milo was RM20 per tin. So before the factory earned 50,000 tins x RM20 = RM1,000,000 per week. 

Now it is possible to re-calculate like this : (70,000 tins x RM20) / 50,000 tins = RM28 new price per tin !! Price has gone up by RM8 per tin - this is my approximation only. 

He can now earn 50,000 tins x RM28 = RM1.4 million per week.

His amount of production is the same ie 50,000 tins a week. 
But he earns RM1.4 million a week now. 

Why? Because the workers were paid extra Minimum Wages with no increase in productivity.

So what is the point of higher Minimum Wages when the prices will go up and make you poor again? Back to square one.  

(Err come January 2020 ALL prices will start to go up again. I guarantee you 100%).

No 2. Or to cater for the higher demand, Milo in Malaysia (Nestle group) will start importing from other Milo factories in Thailand, Vietnam etc. So there will be  a higher outflow of Malaysian Ringgit to Thailand. Our Ringgit will fall against the Thai Baht. As our Ringgit falls, there will be imported inflation. Prices will still go up. Back to square one again.

When you have a committee or a Ministry that decides what shall be the level of wages in the country - there will be TWO things for certain  UNEMPLOYMENT AND INFLATION.

Then Guan Eng announced that graduates will be paid a special RM500 allowance for TWO years if they can get and hold on to a job.  

The employers also will get RM300 per graduate they employ.
Huh?  What ??

So my wife and I immediately worked out the following :  
We hire SPM leavers to work in our jewellery business. 
They start off with Minimum Wages RM1,100 
(These are 18 year old kids who leave the key in the hole when they pull open the roller shutters, causing the key to be jammed into the rollers.) 
Now they must be paid RM1,200 a month.  
Amma ! Appa ! Kadavuley!  

Ok now we will NOT hire SPM school leavers anymore. 
Why should we? 

We will just hire a graduate at RM1,200 a month. 
The government will pay the graduate that special RM500 allowance. 
So the graduate will actually earn RM1,700 per month !!! 
Ammaaaaa !! Appaaaaa !! Kadavuleyyyyy !!

But as the employer I will get that RM300 allowance for hiring a graduate. 
So my effective out-of-pocket to hire a graduate is now RM900 only.
So why should I hire SPM leavers anymore. 
I will just hire university graduates. 
To work as counter sales girls. 
Or cuci jamban janitors in apartment complexes. 

Why? Why? Why oh why? Tell me Great Kahuna.
Because it will cost me less money than hiring an SPM leaver at Minimum Wages !!!

This is what the whole job market is going to do.
They will hire more graduates at Minimum Wages because the effective out-of-pocket for the employer will be only RM900 per month. 

The graduates will get RM1,200+RM500 = RM1,700 per month - so they will not complain.

But what does this mean?
It means the number of unemployed SPM leavers will increase by the thousands. Mark my words.
They will be made redundant by the university graduates.

Every sundry shop, barber shop, cuci jamban janitor agency, petrol station, brick factory is going to be looking for graduates. Pay them RM1,200, then collect RM300 from the government and end up paying only RM900 a month salary per graduate. This is no conspiracy, Zionist plot or Christian scheming. This is what is going to happen. This is common business sense.

Guan Eng says there are 500,000 unemployed in the country, of which 160,000 are graduates. 

Well now the 160,000 unemployed graduates will start putting 160,000 SPM leavers out of work. 

You might say why would university graduates want to work in sundry shops, petrol stations, cuci jamban etc. Hellooooo wake up. They are already doing these jobs. Have you heard of Food Panda? Or Grab Food? Engineers are delivering food.
Factories are even leaving China and moving to Vietnam.

Do you know why? Because all our space rocket manufacturing factories have moved to Vietnam. All our jetplane manufacturing industries have closed shop. There are few jobs left for university graduates. So they have to work in sundry shops and cuci jamban janitor work. I kid you not.

And now we are going to grant 90 day maternity leave for private sector mothers. 90 DAYS !!!  This will certainly increase female unemployment. Especially female Malay staff - because they have MORE children.
This is not my imagination lah. 
This is what is going to happen. 
The job market will react to this immediately. 

A female staff can deliver a baby in September, get three months off and then deliver another baby next September and get another three months off. That is six months off in 15 months !!  

Women are going to find it more difficult to get a job. 

Our policy makers like Thengga Mandey do not seem to know what to do to really develop the economy. They have no ideas. Some of them are wasting their time lighting candles for dead freedom fighters in other countries. 

So to make themselves appear clever they are coming up with rather stupid 'populist' ideas like these which wins the support of the workers and the lay people but creates unemployment, inflation, job losses and weak economic growth in the longer run. 

I have a suggestion : why not just raise the Minimum Wages to RM5,000? 
Why stop at RM1,200? 

And why not increase maternity leave to TWO YEARS? 
The mothers can then fully breast feed their babies. 

Malaysia is NOT YET A RICH COUNTRY that can afford luxuries like high Minimum Wages, 90 day maternity leave, 50 days public holidays (counting State public holidays). 

Taken from OutSyed The Box

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