Sep 28, 2015

Is A Pay Hike Necessary For Indonesian Workers? A Look At Their Real Wages In Malaysia


6.7 million, that's more than the population of some Malaysian ethnic groups and what's surprising is they are not even Malaysians but the estimated total migrant workforce in our country, including illegals.

This figure was announced by Human Resources Minister Datuk Seri Richard Riot in November last year and he pointed out that the number is expected to climb as the demand for foreign workforce remains high, Bernama reports.

Given the continued dependence that Malaysians have on foreign workers with Indonesians making up over 50% of the registered legal foreign workforce of 2.1 million, it comes as no surprise for the Indonesian Manpower and Transmigration Minister Muhammad Hanif Dhakiri to mention that a discussion on increasing wages for Indonesians working in Malaysia will be on the table in upcoming bilateral talks in Kuala Lumpur next month.

After all, if the demand is not there, the need to ensure continued supply of Indonesian workforce would not warrant such high level scrutiny.

In an earlier bilateral meeting with Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi, Muhammad Hanif in Indonesia last week, both countries had already hinted on issues they need to iron out next month including workers passports, days off, legal placement channels, and the announcement by Zahid of a proposed single window system to register foreign workers online starting next month

In fact, the proposal of pay hike for Indonesian workers working in Malaysia is not a new issue as the Indonesian government had previously asked for their domestic workers wages to be increased from RM700 to RM1,200, which Deputy Human Resource Minister Datuk Seri Ismail Mutalib had side-stepped by pointing out that the proposed salary increase was too high compared with the minimum salary of RM900 for our own local workers.

Clearly this recurring issue of wage hike will continue as long as demand outstrips supply.

With increasingly uncertain global economic conditions, weak currency and slowing growth projections, are Malaysian employers still willing to fork out more for migrant, unskilled labour or might this serve as the catalyst to reduce our dependence on foreign labour?

The latest Global Wage Report 2014/15 from the International Labour Organization (ILO) show that wages growth worldwide have stagnated with trends in Asia showing a downturn.

Given such unfavourable market conditions, why would Indonesian choose to pressure our government on this issue now?

Could a pay hike solve existing problems of misappropriation, underpayment, mistreatment and the continued influx of undocumented workers?

Malaysian Digest reached out to concerned stakeholders, NGOs, employers as well as the general public to gauge their views.

Malaysian Employers Not Ready

When contacted by Malaysian Digest to comment on the matter, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan (pic) said the proposal of increase in wages for Indonesians working in Malaysia by Indonesian authorities is not a timely move for the time-being, considering the weak domestic economic conditions and many other interrelated factors. Datuk Shamsuddin Bardan is the executive director of Malaysian Employers Federation (MEF)

“[The proposal of wage hike] can be something difficult for employers in Malaysia to absorb, and I believe most of them are not ready for it. At present, employers in Malaysia are facing a multitude of challenges such as survival problems and the like,” Shamsuddin observed.

Comparing the minimum wages between local workers and foreign workers, he remarked: “Currently, minimum wage of our own local workers in the Peninsula is RM900 per month or equivalent to RM4.33 per hour. In fact, some Indonesian and foreign workers from other countries can earn as high as RM 1,000 to RM1,500 a month here,” adding that there is no such need [to increase the pay] at the moment.

“When it comes to productivity, the performances of most Indonesian workers are considerably low especially in their first one or two year here. Training should be given to them first before anything else,” he noted.

Shamsuddin, however, said: “In the event that Indonesian authorities persist in imposing the pay hike, it should only be introduced to the new workers (new hire) rather than the existing ones,” adding that this can provide the employers more flexibility and time to make the necessary adjustments and adapt to the changes accordingly.

“It is important to facilitate entry of Indonesian workers through legal channels and through just one channel. At the moment, most Malaysian employers are recruiting and hiring foreign workers through third party and that is why the processing fee is unreasonably high," he stressed further.

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