Wage increases nullified by price increases

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I refer to the Malaysiakini report Minimum wage: 100 demos won't change 'No' decision .

Many people would agree in principle with the idea of a Minimum Wage Act to prevent continued exploitation of workers and the pushing of local workers out of the labour market by resorting to foreign labour, both legal and illegal.

However, the question of timing must be considered. If the federal government implements the minimum wage idea at this time when inflation is already rearing its ugly head, it’s likely to further worsen the price situation.

We have the example of the recent hefty government wage increases not so long before the March 8 general elections. The wage increases were soon nullified by the prices increases that followed.

This is one of the reasons why many government servants voted against the ruling BN coalition. Too much of a good thing can be bad as well. Many government servants today are worse off than they were before their hefty wage increases. Pensioners suffer the most.

Unfortunately, nothing much can be done in the short-run and perhaps even the medium-run. Everybody has to bite the bullet, grin and bear it no matter what the political cost. The country comes first.

The best time to implement a Minimum Wage Act is when inflation, including the imported variety, is as low as possible or during a recession (but not stagflation) or when the economy goes into deflation. Pumping money into the economy through the Minimum Wage Act would be a good idea then.

Meanwhile, the best wage to combat inflation again is not through wage increases but through political will on the part of the government and united consumer action against the following:

  • the trend towards spending one’s future income,

  • living in debt,
  • the credit card craze,
  • impulse buying,
  • gross materialism,
  • panic buying,
  • hoarding and profiteering; and
  • through consumer boycotts.
  • The market must be made to understand that the consumer is king.

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