Continuing from where yesterday's article left off on critical issues on social security for the labouring community, the following are more aspects which need reflection and closer attention.
(a) The taxation system in Malaysia is also of no help for the labouring community or their families. The taxation system shows the institutionalisation of an indirect tax regime. In a projection of tax revenues from 2000 to 2005, personal income tax will drop by about 0.5 percent while sales tax will increase by about 10 percent. So, instead of being a progressive tax system with progressive re-distribution, the Malaysian tax structure is moving towards a regressive tax regime with regressive distribution. Indirect taxation imposed in a highly unequal society, shifts the tax burden not only to the poor but also hurts them. We have a regressive, pro-business, pro-rich taxation system.
(b) While there is need for a fairer system of taxation, there is also need to expand the 'net' of taxation to increase revenue. New areas of taxation like taxation on currency transaction ('Tobin Tax'), taxation on FDI, taxation on transfer pricing, internet commerce ('bit tax'), and environmental ('green') taxes will add to government's revenue and if distributed fairly will contribute immensely to social development.
For instance, a global response to just currency trading alone will benefit the whole world immensely. A recent estimate suggests that some US$2 trillion is traded daily in currency markets. Just a 0.25% currency transaction tax rate would have no discernable effects on longer-term investments and the viability of trade. Yet, it could raise up to US$ 250 million per annum.
This amount could be globally shared for social development and poverty reduction. In addition to this way of generating revenue, a committed effort to stop millions and billions of dollars lost in bad deals, corruption, cronyism and non-performing loans can be diverted into social development, which will eventually contribute to a sustainable and dynamic economy.
The labouring community needs support during crisis the savings of and for workers also benefit business.
The practice of tripartism is yet to mature into an institutionalised democratic practice in which there is complete transparency and all sectors play an equally important role in deciding the use of the funds that belong to workers.
(a) The poor attention to tripartism can be attributed to a pro-business authoritarian, paternalistic state and low level of unionisation. Though we have over 500 unions, unionisation is rather at a low level of about 10 percent of those employed. To add to the problem, are those in the informal sector, estimated at least as half of the employed, with absolutely no union protection. Such a situation limits the role of the workers and their power to influence social development policies.
Their effectiveness as a force to be reckoned with is further diminished with general stringent laws on free association based on a flexible, chameleon-like definition of 'national security', with no political party affiliation or systematic representation of their interests in the parliament. Though it helps minimally, a senatorial position is of no real consequence to the labour movement.
(b) The inability of those in the informal sector to join a union places them at the mercy of the employers in an environment that is hardly regulated. Social protection that comes through collective agreement between unions and the employers are not available. In such a context, it would be necessary to consider principles of democratic corporate governance and core labour standards as the minimum to govern the relationship between employers and non-unionised employees. This will certainly help workers in non-unionised sectors and their social protection. Sadly, both are unavailable.
Contradictions between legislations that put workers at a great disadvantage have not been harmonised. Thus, for instance, we have a major contradiction between the provisions of the Employment Act and the Company Act. Within the general national environment that privileges the employers than the workers, the Company Act will naturally take the lead.
Thus, when a company moves into receivership before closure, the chances that workers will receive what is due to them is rather slim, their position in the list of those to be paid falling to the bottom part of the list. This summarily exposes workers to high levels of insecurity both in terms of losing their job and their earnings. There must be due attention paid to such kinds of contradiction to protect the interests of workers. For instance, the workers position in the list of those to be paid needs to be addressed and upgraded.
(a) There is not only insensitivity to the improved quality of life that Malaysia has achieved as a result of the contributions of the labouring community to the building of this nation but also how these changes in quality of life negatively affect them. Life expectancy now stands over 70 years, with women living slightly longer than men. Even with this definite positive change in life expectancy, the retirement age has remained at 55 years, with the private sector just following the public sector in this matter.
With people living longer, an early retirement exposes them to greater insecurity and psychological stress in the post-retirement period. There is therefore a need to reconsider the retirement age and adjust it accordingly. Such an adjustment will certainly improve the social security of workers. Retiring people earlier, absorbing younger workers and then claiming that the unemployment rate is low is really manipulating numbers without addressing the unemployment problem of those retired early in relation to their life expectancy.
(b) In addition to the above problem, there is also a need to reconsider the retirement age because of increasing age of marriage. With the age of marriage moving from about 20 years to about 30 years or later, children are still at school for increasing number of Malaysian workers, along with completion of payments for house and/or car still a long way to go at the time of retirement. To pay for all of these from pension or EPF funds puts many families at great social risk, quite contrary to the aims of a caring society. It certainly will exhaust funds faster. But, to begin with are the funds adequate?
There is a rather serious social trend that is developing amidst us without much consideration given to it. The first generation industrial workers in this country — those who would have probably started work around the later part of the sixties or the early seventies — are moving towards retirement. Or, they have already retired. Many among this group are floor level workers who may retire with a sum of around RM70,000 or less. Such an amount will be exhausted in about four years of retirement. Thus, by 60, financial resources will be exhausted and the remaining 10 plus years (with 70 plus being life expectancy) will have to be spent in an highly insecure situation.
Such a situation will lead to the emergence — among those who built this nation as it transformed from an agricultural economy to an industrial one — of a new category of disguised poverty, the "first generation industrial workers' post-retirement poverty". This group will be rather dependent and highly insecure given the status of low-cost housing and the possibility of healthcare privatisation. Unlike government pensioners and their dependents who are much better of, those who avail themselves of EPF do not automatically enjoy post-retirement security.
(a) Through government-regulated compulsory saving strategy, EPF certainly offers social protection to individual workers through their own savings, with contributions from their employers. However, EPF is faced with a number of critical problems. One relates to the use of the funds or its investment. Investments do not go through the principles of transparency. And the principles of tripartism are not completely adhered to. As indicated earlier, MTUC has been vocal on this matter of the use of EPF as other issues relating to EPF.
(b) The EPF pre-retirement withdrawals schemes also pose problems. Early withdrawals of the money for education, house purchase/payment or computer purchase defeats the purpose of EPF, which should only play a critical role in the post-retirement period. In fact, what must be the government's role in social protection is transferred to the individual citizens through the EPF pre-retirement withdrawal schemes.
(c) Another problem related to EPF is when complete withdrawal is done. The whole logic of EPF seems to be based on the fact that the lump sum money obtained on retirement can be invested on productive economic activities. Retirees are expected to be businessmen/businesswomen or investors. And, this will provide the necessary income for retired persons till they expire.
This is an assumption based on very spurious and unsustainable ground, without any planning or preparation of retiring persons. Further, among those who are retiring, which section can really afford major investments? In a turbulent economic environment and a highly vulnerable model of growth, investment of EPF withdrawals does not necessarily provide a secure post-retirement income, particularly when one has worked at the lower levels of the division of labour.
(d) It is all too obvious that the insurance industry has an eye on the huge EPF funds. It knows that it can harvest a huge profit by making the funds available to the industry. This has been attempted by poorly worked out pension schemes, which are not advantages to the workers. While a pension scheme like the one run by government is attractive, there needs to be very careful regulation of this area where the possibility of workers eventually losing or not really gaining much from the arrangement looms large.
(a) Both minimum wage and unemployment benefits are non-existent in Malaysia. There is a MTUC proposal for a minimum wage of RM900. To begin with, the government showed some interests but there has been no definite step in the direction. In considering the minimum wage, MTUC believes that it should be dynamic i.e. adjusted with changing times and that it should not be taken to imply an across the board change in wages. It is about guaranteeing minimum wage to the labouring community to meet their basic requirements and not about having another Mercedes Benz!
(b) Unemployment benefits are also not available in this country. Such a system is seen very negatively both by the government and business. Business seem to think that a society that takes care of its unemployed through institutionalised support will put an extra financial burden on business sector as a whole and, worst still, encourage a 'dole mentality'. With government double standards and support, there seem to be an "employer prejudice" against any form of unemployment benefit. Associated with this is also the poorly regulated area of retrenchment, which of course leads to unemployment.
In realising social protection for the labouring community, there is the need for a proper strategy of targeting. In Malaysia, the only well developed strategy of targeting is linked to the affirmative action policy. And this is based on an exclusive ethnic principle rather than on an inclusive economic principle. Such politically motivated targeting strategies are in the long run harmful to the social security of the workers in general and those in need of special attention, whatever their ethnicity is.
M Nadarajah is a sociologist by profession. He works on sustainable development issues and is presently the deputy co-ordinator of a virtual organisation called the Asian Communication Network, with an anchor in Bangkok, Thailand. The article is part of his country report for ICFTU-Apro and MTUC.
