LABOUR and its related issues will remain a persistent concern in planning and managing our domestic economy, as well as in immigration-related enforcement matters. Some aspects of these concerns appear almost daily in the local media. There appears to be the view that the matter can be overcome by merely tweaking a few aspects of the problem.
The sooner we realise that we are no longer a labour surplus nation, that our wage level is not that high to retain critical skills and talents, that we have to enhance our labour productivity to compete internationally, that we have to attract high-technology industry to come out of the low-income trap, the faster will be our adjustments at both policy and firm levels.
Labour-related matters are not only a policy concern; they are also routine corporate-related matters in our effort to bring greater efficiency and productivity at the plant level. The longer we procrastinate in making decisive changes in our management of workforce and labour-related matters, involving wage levels, automation, mechanisation, computerisation and productivity, the longer we will be dragged by labour related issues.
Malaysia has to realise that this critical issue has to be addressed in our long- and medium-term planning, and policy formulation. Unless we do so, the labour issues will continue to haunt us and undermine long-term corporate adjustments and business planning.
To be sure, several issues directly surround labour force concerns in this country, and they span issues such as shortages, wages, skills, talents, and not the least, productivity. Indirectly, the concerns have bearing on other matters, such as our immigration policy, housing and social make-up of society.
These matters need to be appraised, examined, analysed and incorporated into the planning of the country. They may not have been given a comprehensive treatment in the past, and given the seriousness of matter, deserve an utmost immediate attention. A piecemeal attention is inadequate.
Yes, in the past, we did look at issues such as minimum wages, talents and skill formation. However, they are not seen in an integrated manner and not exhaustive enough to incorporate topics such as labour productivity, techniques of production (capital versus labour-intensive techniques), return to labour versus return to capital, soft skills and technological capacity of our workforce and their innovative and creative capability to bring the economy into high income such as those in South Korea, with a highly innovative workforce, such as that of Japan and Germany.
In other words, the issues of human capital must be placed at the fore of policy calculus replacing the issues of financial capital and land, for which the nation is well endowed.
It is proposed that the authorities set up a strong central agency to examine the issue of labour economics in great depth. The agency can propose long-term solutions for economic planning and national management for the country, and theses are relevant to both the private and public sectors. Given the centrality of the subject, the concern should be incorporated as key variables in the computable macroeconomic model that macro planners are acquainted with. With our population size of about 30 million, we are neither a small country, with the only option is to go for high technology and skilled workforce, nor are we a large nation with a large labour surplus, such as China or Indonesia, with elastic labour supply to draw from.
On realising this, we will underscore the importance of human capital issues in national planning, and we will be become realistic and pragmatic so as not to rely on foreign labour as the answer to our problem of labour and skill shortages. Honeymooning a bit too long with foreign labour allows the employers to extract a lot of surplus in the form of profit and dividend, while refusing to give a bigger share of compensation to the workforce.
In this regard, the employers’ argument that our cost of labour is high and driving away investment, does not hold water any more. Many countries have opted for higher wages and yet draw new investments with capital-intensive techniques of production while allowing their nationals to acquire high level skills and receive equitable wages and, at the same time, addressing the long term income disparity between income groups.
Let us aim to restructure our industries, skills, wage levels and change our mental make-up so that the much-needed economic transformation of our economy and society will be achieved in the foreseeable future, and Malaysia becomes a high-income economy in the full sense of the word.
* This article was written by Tan Sri Dr Sulaiman Mahbob, the chairman of the Malaysian Institute of Economic research
* Appeared in The New Straits Times on May 30, 2016