Economist warns of disaster from forcing firms to pay full wages

PETALING JAYA: An economist has warned that forcing employers to pay full wages during the movement control order (MCO) period could have disastrous implications.

Companies that were not making money could go bankrupt in three months, Woo Wing Thye of Sunway University told FMT.

It would be equally dangerous if the government were to insist on prohibiting the companies from retrenching workers, he added.

He was commenting on the government directive requiring full payment throughout the initial two-week MCO period for employees in non-essential services.

Woo called for “emergency room economics” to be implemented while the MCO is in force, with aid given to those earning low incomes.

He said self-employed low-income earners such as pasar malam traders and freelance labourers should get direct cash aid amounting to RM1,100 a month during the MCO period or for a maximum period of three months.

“This is because Malaysia cannot afford to have an MCO that exceeds two months plus,” he said.

For employees earning RM 1,300 or lower, he suggested payments of at least RM1,000 a month, with the government lending the companies the money to cover wages for a maximum of three months.

“If the companies can show that they did indeed use the loans to pay salaries and did not lay off any of the low-income employees, the government can write off 50% of the loan after three months,” he suggested.

“This private-public sharing of the wage burden will protect the most vulnerable by discouraging companies from laying off the low-salary workers.”

He said Bank Negara could print money to fund such a three-month programme.

He also said the government could not afford to support the wages of those earning above RM1,300 and should facilitate negotiations between employers and unions to enable reductions of up to 15% in their salaries for three months.

“There is a need for employers, employees and the government to share the wage burden in order for the companies to survive and to protect the lowest income group.”

Laurence Todd, research director for the Institute for Democracy and Economic Affairs, had similar sentiments.

He said the government should step in to subsidise incomes up to a certain level for those who cannot work during the MCO.

“The starting point can be ensuring everyone can continue to earn at least the minimum wage,” he said.

“I think the responsibility is on society as a whole to prevent people from falling into real hardship, both individuals and businesses.”

He said the various measures could not be sustained for long and this was why it was important to expand the country’s Covid-19 testing capacity so that the virus can be managed with lower levels of restriction.

Malaysian Trades Union Congress secretary-general J Solomon said there should not be any wage reduction for those in the B40 and M40 income groups, even with the extension of the MCO,

“During the good times the employers never shared the wealth acquired from the sweat of the workers equitably,” he said. “That is why there is wide income inequality in Malaysia.

“Many could not sustain themselves during the normal times with the pittance they were paid. How can they survive any reduction in wages during this crisis?”


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