Thursday, February 19, 2009

Getting casual with safety nets

I think it is about time I weighed in a bit on the very important issue of employment in the wake of the unravelling economic conditions in Malaysia although, by way of disclosure, I, myself, am an employer.

The likely order of priority for conscientious employers whose business is threatened by falling sales turnover must be to pare down costs. These should include basic stuff like reducing inventories, re-negotiating supply contracts, reviewing freight charges, restructuring borrowings and, re-locating premises. Only after all these should employers look at employment issues such as cutting pay, reducing working hours and (Heaven forbid), retrenchment and lay-offs. I am obliged to call upon employers NOT to do the dirty thing by putting deliberate pressure on certain employees to pressure them to resign. That is unethical and sinful conduct.

Getting casual
Having said all that, I anticipate that one growing trend in employment may be for employers to start sourcing for casual workers to meet work demands as it orders rise and ebb from week-to-week or, month-to-month.

Permanent staff are a fixed labour cost that employers will start having great misgivings over compared to the flexible cost provided by casual staff. Casual staff has no major protection under employment laws (which are tedious and cumbersome and, open to abuse by nasty employees). Casual staff are not entitled to EPF privileges. Benefits are very marginal and few.

But, the worst case scenario is, of course, unemployment. This is where social safety net policies need to be looked at in Malaysia.

Comparative social safety nets in other countries
This is what I have obtained from an interesting Businessweek piece:

The United Kingdom - In the United Kingdom, the system provides a very basic payment of the equivalent of USD100 per week, known as income support. Literally anybody is eligible for this income, even foreigners living in the UK. This has the great advantage that people don't starve to death in the street or in their flats. Beyond that basic level, people in the UK can apply for an old-age state pension, free health coverage, tax credits for the low-paid, and housing allowances or free government housing. Unemployment benefits are, therefore, regarded as part of a menu of poverty alleviation measures.

Japan - The Japanese ethos is said to be more puritanical. Medical costs are subsidised by 70%, for example, rather than 100%. And benefits take the form of insurance, rather than welfare. In other words, you only get paid in bad times if you have contributed in good times. The application process is stricter than in the UK, with suspicious and powerful case officers dropping around for home visits. Resigning from a company means you have to wait three months for unemployment benefits; and you must have worked at least six months in the past year to qualify. Unemployment benefits cease after one year.

The main problem is thus that while core constituencies of the economy are protected (those with regular jobs, married mothers, and old people who have paid unemployment and pension contributions), the welfare system does not sufficiently cover the workers who have been marginalised in the interests of efficiency. It is this number which has been growing, especially following former Prime Minister Koizumi's labour market reforms in 2004. These people, on low wages, may be unable to pay unemployment, health and pension contributions.

Germany - Germany has a hybrid system whereby workers work half-time for half-pay—but the state makes an extra contribution, leaving the worker with around two-thirds of his original income. 

The interesting issue is whether Malaysia has adequate social safety nets in place at the present time. We do know that regardless of whether we are Malay, Chinese, Indian, Dayak, Kadazan, Bajau, Kelabit, Kedayan, Orang Ulu and so on, when we become unemployed and, cannot find a job immediately, we balik kampung to our parents' home. That is our social safety net...our parents.

But, policy makers should note that many employees have established families replete with spouse, children, housing loan, car loan, furniture loan and other financial obligations AND, above all else, many employees are too old and too embarassed to bring the whole retinue to camp out in their parents' home. 

Perhaps, it is timely to look into this. I believe that this task should go to Ng Yen Yen's ministry. She's got the right stuff. She's got the energy. She should do it. And, of course, the fact that she leads the Ministry of Women, Family and Community Development is apposite.

Or, should the job go to the Minister of Human Resources?  

Oh, well, somebody should look into this.


walla said...

Out of 27 million, 1 wrote on this.

Good morning Malaysia

de minimis said...

Oi! walla

Gooood morning :D

walla said...

Hopefully someone somewhere will do something to escalate some focus on this matter which will be if not already central to our existence:

The big, macro, renovations done upstairs will not matter one bit to the small, micro, people downstairs who are already sundered by the floodwater coming in through the front and back doors.

It's not just about social welfare during extraordinary times of crisis. It's also about political gravitas.

mekyam said...

so there is virtually no social security net for the average malaysian. what a grim picture.

i'm reminded of "the ant and the grasshopper" fable. we were really grasshopping in the halcyon days, yah?

p.s. ct, i suppose a win2-solution would be for employers to rehire retrenched employees as casual workers. that way they are able to maintain optimum workforce for less, don't have to train new hires and employees still have paychecks, even if reduced or minus perks.

de minimis said...

You have a point there, mekyam