Friday, May 06, 2011

Let's Tackle This Major Issue - Foreign Workers

Is foreign workers good or bad for Malaysia? This is not just coffee shop talk, and while we are at that, ... my Nepalese friend is bringing me my duck rice while my Indonesian friend is asking me if I want kopi-o or kopi-o ping. I am saddened that our government, obviously, have not given much thought to the economic ramifications of excessive foreign labour.

http://www.rujakmanis.com/gallery2/d/590-1/Nia-Ramadhani_2.jpg

The towkays would say, fine, bring them in, they are filling jobs locals do not want. BULLSHIT, you fat asses!!! Locals do not want the work because of the stagnant pay and horrendous working conditions. Please check how many Malaysians go "jumping ship and planes" to work as farm labourers in the US and Australia, that's because they pay RM30 an hour, not RM30 a day for that kind of work.

Our government have taken the easy way out to suppress cost for businesses. That's why we have the largest contingent of foreign workers as a percentage of our labour force in Asia. Its to keep us competitive, they say. I say more B.S. .... maybe the government do not understand the economic ramifications of such a major policy. That is the really sad part.

When foreign workers total 30% of your labour force, you are basically forcing down the salaries for everyone else. But you forgot that salaries are but one component of the overall cost of goods and services - can you also import cheaper land??? That's why graduates salaries have been the same now and 15 years ago, unbelievable, but the cost of housing have tripled.

http://www.rujakmanis.com/gallery2/d/1300-1/Dandanan+Pink+Ala+Nia.jpg

You may be able to control the basic necessities such as rice, flour, sugar and even fuel and gas - but thats because we are subsidising them. Can you also get foreign workers to dig oil out at the same cost for the past 15 years? Suffice to say, our subsidy cost has tripled over the past 15 years and we can no longer afford to do that, thats why fuel prices have to keep going up even with subsidy. Its the same for all commodities. Unless you can impart the same cost savings in all matters of land, housing, food and commodities ... suppressing wage bills has been making most Malaysians finding it harder to make a living. Tell me if I am wrong. I wish I was.

Simply put, a country's economic progress is only as good as our natural resources, the way we allocate and invest our surpluses and the collective productivity and efficiency of our workforce. This is the most important point to this issue - the more we rely on foreign workers, the more we suppress our wages, hence at the same time we are seeing a greater brain drain of our capable citizens to foreign shores for better pay.

See if Singapore will crumble without Malaysians, of course it will. See how many of our capable people are working now in the Middle East, HK, China, Australia and of course Singapore. WE ARE BASICALLY REPLACING ALMOST EACH OF THOSE "BRAIN DRAIN-ED" WITH FOREIGN WORKERS!!! How do we not expect our economic progress be limited or even stunted over a prolonged period of time??!!


I have nothing against foreign workers, they just have to make a living. If its not Malaysia, its somewhere else. Malaysia already is the TOP DESTINATION for Asian migrants who account for 8.4% of our population. The economic disservice is that they are only contributing at the lowest levels of work stratum; PLUS they are remitting tons of money back to their home country - if they were spending and reinvesting into Malaysia, then its a different kettle of fish. Any economist can see that this is a bad thing for the economy.

http://lh3.ggpht.com/_8wET6Zjy7z0/SEI4h_oVykI/AAAAAAAAAA4/AohBtdhZUTI/nia20ramandani2054sd9.jpg

So we are replacing skilled workers with unskilled workers - wages stagnant but other cost of living components rising like nobody's business. Malaysia has been able to tolerate that disparity for so long because of our natural resources, but its getting a lot tougher. Ask the government finance department and they can tell you that "oops, its not balancing out that well".

Reverse that policy immediately:
- implement a RM500 monthly levy for every foreign worker for a start immediately, be they in construction, plantations, services or even maids.
- increase that levy to RM1,000 a month per worker from 2013 onwards. Then you can see employers shifting their thinking and business model.

Yes, wage bills will rise, but its a necessary evil for a start. The economy will become more equitable as more money flows through the system. Yes, public service wage bills will jump and so too will graduates starting pay. Yes, we will end up paying a lot more for goods and services but things should even out a lot better for all Malaysians over the longer term.

We have to seriously do this NOW because the consequences are pretty dire if left the way it is. Its not the hardware, but the software that needs upgrading, people.

I have posted before on Malaysia's middle-income trap:
http://malaysiafinance.blogspot.com/2010/08/malaysias-middle-income-trap-or-is-it.html

http://i386.photobucket.com/albums/oo307/beautifulnara/niaramadhanicomel.jpg

31 comments:

Shut said...

Totally agree with you man.
Keep on writing. Hopefully the minimum wage is the answer to all this.

ronnie said...

You should be finance minister

David Koay said...

The greatest barrier I see now remains the political will to change. The current govt will be accused of being business-unfriendly if they restrict foreign labor. Btw, rumors have it that foreigners are used especially in East Malaysia to help the current govt stay in power. It won't be politically correct to say this is 'open secret'. Higher prices of goods/services and withdrawals of subsidies are detrimental to their political position. Thus, this issue might be close to impossible for the current govt to tackle for the sake of staying in power. Malaysia is in a sorry state :(

Boon said...

You havent touch on the capital outflow due to foreign remittence by the workers, the indirect impact on our economy could be greater. Great work.

Roy said...

very good observation and solutions Dali. You should be working closely with Idris Jala on this.

TH said...

I sometimes wonder if this Government of ours are manned by competent people or NOT. Do they really think that by stimulating growth of businesses the additional benefits would pour down to those that are surviving on fixed salaries. I personally think not. Would our taukays share the extra that they make with their staffs? Maybe some more generous ones would, but I think those are hard to come by. Furthermore even if they do, how much are they willing to share? 50%, 60%, no, I think 20% is more likely. So, howlah high income? Yes, high income for taukeys lah, but us workers same same loh eat less, spend less, very soon eat grass ledi.

Salvatore_Dali said...

boon,

u havent read my posting clearly ... go read again

clearwater said...

Ever looked at the migrant/emigrant labor issue from the perspective of Archimedes' Principle?

Malaysia is the bathtub, its people the water in the tub with foreign workers the person getting into the near full tub. Well, some of the displaced water will overflow. The trick now is how to get the overflow back into the tub after the person gets out. If you have a solution, Talent Corp wants to hire you.

Kingsmen said...

one thing i must say is that the local workers' turnover is very very high in every sector. The locals are unwilling to go the extra mile even if it pays a bit more. And especially the chinese, all of them wants to be their own boss. This foreign labor problem will be here to stay for a long while....unless ....

clk said...

There is no such thing as "cannot get workers".

There is only "we don't pay enough"!

Effectively market adjust themselves once one pay market rates...and the spillover is there for the picking at the macro economic level.

You can't pay foreign labour wages in M'sia and expect to support a motor or housing industry.

Workers are ultimately consumers.

Richard Cranium said...

Right, while your suggestions are working though the system, there will be riots in the streets, lives lost, and properties destroyed.

I am an employer, and there is nothing better for me to pay my workers first-world wages. But my customers don't wish to pay me first-world fees.

So, who is to blink first?

While I am in agreement with your overall premise, I think your prescription is a little naive.

Meaning, the short-term pain that you allude to may be too severe to contemplate for the powers-that-be. Contrary to belief, this government is not made up of all stupid politicos.

Do you wish to go through a civil war between the haves and have-not? Don't quote Thailand -- they are about two political parties.

What will you folks do when violence erupts? The govt prints Zimbabwean money with expiry dates so that people can have a semblance of wealth?

This is why Malaysia Tanah Pusaka is log-jammed. We are now officially like a deer caught in oncoming headlights. Its just a matter of time.

Boutique Classical Attitude said...

Its a fact that our country cannot retain professionals, 2 of my siblings have migrated out of the country. Its quite common to find at least one or two members in a average family to be in the same situation.
This means we produced talents for other countries.......

Salvatore_Dali said...

richard cranium,

no need to say my prescription is naive ... whenever you want to roll back a policy, there is bound to be dislocation ... and for such a long entrenched policy, the dislocation will be massive ... but the issue is whether we recognise the issue is a problem ...

to solve the issue, there will have to be a thorough paper on the various industries affected, how to adjust the civil srvants pay packages, whats the burden on gov coffers and budget, etc... i m not saying its easy

the proposed levy is to ensure that the process gets a stop gap measure... at least employers will only take on foreign workers if their work is deemed "effective" at the higher pay, or hire a local to do the job, at least the food stall owners will now think three times whether to have 3 foreign workers manning the stall or doing it themselves

it has been too easy, and the ramifications are too great to just shrug shoulders n give up

bOcy said...

Employee, employers and those who are not familiar with certain industries will definitely have different stance on this topic

My concern is.... most parents would prefer their kids to be educated, as high as possible (especially chinese). I plead guilty

Nobody wants to be fireman, policeman, general labour, plumber, cleaner anymore. They want to be business owners, entrepreneurs, investors.

Everybody wants to work smart, not hard and get fast money. brains can get you more money and faster, why use blood & sweat...? (look at how network marketing educate youngsters)

If we are paid triple(RM2500~Rm3000?) the salary of foreign workers, are we willing to 'camp' in ulu ulu places and cut palm oil (except rubber, its good money now) or play with mud and concrete under the hot sun (construction)? most chineses, some indians and malays (especially younger ones) would probably say no.

If its manufacturing,services,sales most would probably say yes.

And then there's what Mr. Richard C said, businesses whose clients are big corps/government/main contractors, can they pass additional costs to the clients? Most of the time, no.

How about these clients passing their costs to their clients: the consumers? Most of the time, yes. (Which causes inflation?)

In the end, whether its due to low pay, or racial inequality (either special rights or those who think they're racially much superior than others and don't deserve to work in labour-intenstive jobs), people with powers need to solve this brain-drain/occupation imbalance situation.

By the way, employment of foreign workers is causing brain drain? We're not hiring scientist from Pakistan/Myanmar/etc to construct nuclear bombs, are we?

bOcy said...

By the way, some "foreign" workers now prefer to go to Saudi, Korea, Japan, or stay at their own country, where they are paid better than in Malaysia.

Hell, new pakistani workers arrived last week refused to work because its too hot under the sun, what the f***?

Salvatore_Dali said...

bocy,

by replacing cheap labour, we r resigning our fate to always toiling in sunset industries... yes malaysians do not want hard work under the sun... does that mean we need to employ foreign labour??? certain industries maybe ... say plantations is ok ... but the rest, we r just ensuring that the sunset industries continue ... we never move out of the paradigm... u think singapore can afford to break stones n even manufacture steel ... no, it does not make sense for these industries to survive ...

we have to move up, businesses that cannot survive with higher wages, should close shop, we r left with industries that are value added, which means we can pay more...

hiring a lot of foreign workers, depresses wages for all... an acctg manager may be on RM6k a month, if we did not suppress his wages, he could be getting RM10k ... now he has opted for S$6k in singapore... thats a large indirect push factor, don't get smarty pants on me about hiring burmese scientist, engage in the issue not make silly comments that r obvioous

bOcy said...

managers or directors certainly don't set the pay of the acct manager based on the pay of foreign workers.

But pay for other positions will definitely rise as talent are now more appreciated, with or without foreign workers

gabriel said...

i'm not an expert here, just sharing my thought. if you been to sarawak, you would notice that there are not many foreign workers there (i heard foreign workers are not cheap there). yet, sarawak suffers very serious brain drain. not only good brains, those school drop-out too are running away. my point is that foreign worker is not main cause for issues you pointed out.

Salvatore_Dali said...

gabriel,

u r right... foreign workers is but one issue... there has been massive misallocation of resources, under investment, leakages n wastage

ronnie said...

Raise the minimum wage for a start

hc said...

I look forward to the day when all workers, blue, white or knowledge workers,can have a salary that allows them to pay for essential necessities and savings for the rainy day and retirement.

We need to change our mindset. Like Dali said, it's better to do it sooner than later. Stop the exploitation and dependency on cheap labour or modern day slavery. If we continue to rely on cheap labour, regardless of origin, this country will remain as a Third World country for a long time.

When we start to pay decent wages, we can expect service, quality and productivity to improve. If we pay peanuts, we can only get monkeys to do the job.

New and future entrants to the workforce will have more flexibility to pursue skills that suit their talent and personality rather than doing something to appear respectable or make their parents happy.

You need a strong forward looking political leadership to engineer the social change.

hc said...

I look forward to the day when all workers, blue, white or knowledge,can have a salary that allows them to pay for essential necessities,savings for rainy day and retirement.

We need to change our mindset. Like Dali said, it's better to do it sooner than later. Stop the exploitation and dependency on cheap labour and modern day slavery. If we continue to rely on cheap labour, regardless of origin, this country will remain as a Third World country for a long time.

When we start to pay decent wages, we can expect service, quality and productivity to improve. If we pay peanuts, we can only get monkeys to do the job.

New and future entrants to the workforce will have the flexibility to pursue skills that suit their talent and personality rather than doing something to appear socially respectable or make their parents happy. There will be less pressure to create more places in 'highly-desirable' courses locally.

You need a strong forward looking political leadership to engineer the social change.

syakir said...

IMHO,

1) Levy on foreign workers is good.

2) But RM500 is too high. RM1k is insane.

3) Malaysians are already complaining of high food prices. That level of levy will increase prices by 10x minimum. That's more suffering for urban folks. People living outside cities won't be able to survive.

4) the short pain won't be grumbles, there will be riot

5) Selangor's MB, Tan Sri Khalid proposed RM10/month levy in the past. I am sure he has done his cost-benefit analysis. Should start at that.

6) IMO, for immediate actions, we should focus on car and house prices. Slash automobile import tax and cut APs in half. Then slap a higher RPGT and remove the 5 years rule.

clk said...

A country's real prosperity is how much wealth is in the hands of the masses..low and middle income earners.

If all wealth were held by the upper class, there is no future for any country.

So all employers out there, if you want consumers to buy your products please start paying decent wages. Only then will we create real consumption!

@amirhghazali said...

The problem that we have with the government is that each ministries are probably working in silo when it comes to economic matters. Each section of the government are chasing their own targets without realising the overall effects that they will have on the economy. Hence we have one ministry chasing subsidies to be reduced while another ministry continues to allow foreign workers in the country to increase. Those efforts do not work in synergy with each other, not even to the government's benefit in terms of popular support. Reduction of subsidies reduces the individual purchasing power while depression of the local salaries will make it even worse. More worryingly, these effect will be magnified at the lower income level, increasing the polarisation between low income level and the middle income population.

The government is too used to quick fixes which will give fast solutions but can have detrimental effect if used for too long. The government should have pared down the foreign worker numbers while we are ahead of certain countries in terms of competitiveness. Now that we are starting to lag behind we are essentially addicted to this solution. For a government that has been in power for so long, it certainly thinks and act as if it will be displaced tomorrow.

A signal must be given to the industry that a change is required. Employers need to start contributing towards development of local labour forces. It seems that this responsibility is left only on the shoulder of the government. Most business owners are only thinking about maximisation of profit which goes to their personal coffers. They need to realise that by helping to develop local manpower, they are actually helping the local economies around them which in turn make their business more profitable in the long run. This change in mindset is certainly difficult but it is definitely the area that government need to concentrate on. An increase in levy for foreign worker is certainly a step toward that. The amount of levy is not a crucial factor here, it is the trend that's important. If business can't afford it initially, charge them an amount that they con comprehend, but be consistent to increase it as we go along and don't fall back when put under political/popular pressures.

A comparison of the economic structures of various countries coupled with the socio-political situation that we are in needs to be done by the powers that be and they need to decide where we'd like to be in 10-20 years time. I can't imagine that they have done this and decided that this low purchasing power environment is the best model there is because a 30% foreign worker will certainly lead to this due to the depression of the local salaries.

Super Saiyan 3 said...

No, i don't think it will work. Even if we pay RM1000 more to every local worker, their production will still not comparable to foreign worker.

I never seen "hardworking" locals. Never! Be it in studies, business, plantations, or kopitiam.

The solution has to be in encouraging locals to work hard from young, perhaps since primary school or home education. Why don't our politician just ask them to work harder?

tanhc said...

Malaysia is certainly not without entrepreneurship. Take a walk in all the pasar malam awa pasar pagi.Count the number of stalls and you will certainly find the number increasing by the day. And these pasars are very much alive everyday, in different locations. Monthly income for each operator can easily range between rm 3K and 4k, if not more. So why work as an employee?
The situation is further worsened by the fact that our beloved govt is one which loves to surround itself with mediocrity (for obvious reasons lah) and it is often being shunned by the brilliant and the smart who are naturally very quickly being snatched away by our immediate neigbour awa those on yonder shores.
So how do we resolve this issue?
Malaysia is indeed in a sorry state. And do we just sit and stare?

Holding Sdn Bhd said...

Dali, i owned a healthcare manufacturing factory, and by reading what you wrote, i think you dont understand the whole situation and i bet you never work in a manufacturing sector before. Firstly, just put aside the salary issue, local worker especially malay (im not suggesting all) don't really have the discipline and dedication to handle the job responsibility, most of them will always have excuses not attending work worst still, bad attitude. A lot of them will absent at least 4 days per month. Secondly, what do you expect employer to pay for a SPM or diploma graduate who cant even write nor spewk a proper english. We are paying them (SPM) RM1350 include OT and diploma RM1750 include OT. But with this kind of attitude its not worth at all, they dont care about company policy and gmp standard operation procedure and most importantly the tidak apa habit! Think twice about what you say when you never experience the situtation and just sit in the office and just assuming everything is the way you think it should be!

Salvatore_Dali said...

holding sdn bhd

ok, i understand... so if Malaysia bars foreign workers, would u still have a business?

if the country puts up a RM500 levy permonth for each worker, would u still have a business

if the answer is no to either, u r running a bad biz model that is a sunset industry

don't bitch about how poor local workers are as if that is justifying hiring foreign labour, that is a separate issue altogether

Holding Sdn Bhd said...

Dali,

We are not saying that we dont want to hire local workers, in fact we are still trying hard to get local workers, The main point is that we try to avoid paying the price of mercedes benz and get proton quality. Some local workers are demanding too high and give too less return/effort to the company. As for bad business model, which mean TOPGLOVE, SUPERMAX and all the palm oil cultivate listed company is having a bad business model?? we are just trying to sustain our profit margin as raw material and borrowing cost is getting higher. Pls be consider for some industry which is selling fast moving consumer goods, and cant raise product prices too much.

saddenM said...

trying not to be 1 sided but does increasing the levy really solves the problem? is it that easy to solve our salry n manpower issues?

lets say all foreigners are now sent back. salary were increased but can u guarantee staffs working attitude or attendance will improve? can oour industries provide better performance or services?

u blame the towkays n foreigners but i see the issue from ourselves. malaysians are gettings lazy if u have not noticed, skipping schools n work. none company i worked before has not faced manpower issues.

there was a retail company where i worked b4 there were some with 4-5k salary some with 1-2k. these were the regular absents and "sleeping on the job" attitude with no spirit.

noticed in some kopitiams foreigners are performing much better than locals.

i have this perception malaysians like to take things slow, relax and enjoy. not to say that enjoying life or relax is bad, but seems most of us is over the board in this.

not that im towkay but being in middle management does some supervising work and finds that not towkays nor foreigners the issue here.

not sure SG will crumble without us but not sure also MY wont crumble without foreigners.

as per my understanding locals do not want to work in plantation, factory, restaurants, or cleaning. so stop these businesses? these businesses are also related to other businesses and sectors as well which might cause a sharp downfall in our economy. not expert in economics i may b wrong.

also business that cant sustain levy/high salary must close. when many business close will cause unemployment thus higher crime rate.

i suggest that u try to be a towkay urself in any of those sectors before u blog about these things. dont just go around saying to increase levy or calling ppl fat ass and asking ppl quit bitchin'.

u have no right to say that to other. not trying to diss anyone here but i always aim for fairness and equality. just saying so that u'll know empathy and think in other people' shoes