Malaysia needs a job guarantee scheme
Reposted from Think Left, June 22, 2022.
Parti Sosialis Malaysia (PSM) has recently launched a campaign called ‘Pemulihan Nasional’, also known as a ‘National Rejuvenation’, aimed at providing necessary steps in order for Malaysia to rise out of the challenges brought forth by the COVID-19 pandemic. We have proposed 5 pillars for this campaign and the second pillar, which focuses on introducing a job guarantee scheme, will be elaborately broken down in this article.
The answer to the initial pertinent question as to why we need a job guarantee scheme in the first place can be found through investigating how the pandemic has disproportionately affected different strata of our society. In 2021, Malaysia’s wealthiest individuals experienced a 14% growth in their total net worth to nearly US$90 billion. In the same year, the annual inflation rate showed an increase of 2.5%, following the previous year’s deflation of 1.2%, which has clearly translated into the massive rise in food prices. Moreover, 46% of Employees Provident Fund (EPF) members below the age of 55 have less than RM 10,000 in their respective accounts; along with an estimate of 3.6 million EPF contributors with savings below RM 1,000. The EPF also reports that the members’ basic savings threshold (RM 240,000 at age 55) dropped from 36% to 27% as a result of COVID-19 related withdrawals to supplement their income during the crisis. This brings into stark focus the very real prospect of a fast approaching future with generations of retired individuals left without any savings to sustain their livelihood.
As explained above, we can see exactly how the capitalist mode of production works in enriching those who already hold capital. Those who have ownership of factories, agricultural land and businesses will always benefit from the system – as they primarily influence how capital behaves and is utilized. During periods of economic strife, the first people impacted from fear of uncertainty, loss of wages/jobs and benefits, are workers who have no say in the matter. Hence, during the pandemic, they are the ones who were left to suffer those losses whilst expected to hold no complaints. Of course, this doesn’t just occur during recessions. Similarly, in relatively peaceful times, the power of the worker is minimised to ensure profits are maximised for business owners. The corporate tax rate has reduced from 35% in 1992, all the way down to 24% in 2021. Wages have also stagnated especially for fresh graduates, according to the Ministry of Higher Education. The proportion of Malaysian graduates with degrees earning between RM 1,001 and RM 1,500 hit a decade-high. This was the same year when it became the biggest category compared to other years, including 2019 – when the biggest category was RM 2,001 to RM 2,500. Unionisation rates have been minimized as well, with only 6% of Malaysian workers unionized.
The power of the worker, as we can see, is diminished tremendously compared to corporations without even taking into consideration tax breaks and bail-outs that have been performed. Furthermore, unemployment and underemployment create a downward pressure on wages and benefits, as the supply of labour is greater than its demand. This is termed as the reserve army of labour. With all these analyzed and kept in mind, we must then recognise that the core problem is the private ownership of the means of production. Specifically, the national problem is the lack of participation in the economy. As unemployment and underemployment are at play, the growth of the nation in key sectors such as agriculture will be diminished. As a state, we will inevitably only play the role of a vendor to a conglomerate of corporations for profit and our workers will forever be cogs in the machinery that is the global supply chain – which ultimately represents the modern face of imperialism.
At this point in time, we must also recognise that the state is set up in order to benefit the masses. People vote in representatives to execute policies that will ultimately benefit them. It is then the innate responsibility of the state to guarantee and provide good quality living for its people. Thus, a job guarantee scheme which is spearheaded by the government is absolutely essential in combating the vulnerability of the economy against private profiteering. As the government guarantees jobs that pay a living wage, the reserve army of labour, as mentioned above, can be decreased – therefore decreasing the demand for jobs from the private sector. Private companies are then forced to increase wages and benefits to attract talent. The upward pressure on wages and benefits help to better overall working conditions, especially for traditionally low wage jobs, as these are the ones in which competition is created disproportionately.
Additionally, it is important to mention that the capitalist mode of production allows only a select few industries and sectors to thrive whilst others are ignored. These few sectors are those that can be capitalized the most and provide the most amount of private profit. Many forgotten sectors, however, are especially vital to social conditions. For example, an often forgotten sector is social work. A strong social work system would allow for workers to be stationed at critical spaces such as low-cost housing areas, to identify specific areas of need for the people most affected. This can directly aid in the best and most effective manner whilst feeding back into policy-making through well informed perspectives. Improving financial support for social work will enable many low-income communities to meaningfully engage in the economy and boost money circulation, as well as drive further national improvements, justifying the initial investment. Without a direct method to monetize social work, practically no private enterprise focuses on it because it does not feed them profit. In the end, the lack of focus on this area causes many social issues to affect low-income communities, including health issues due to malnutrition and prevalence of crime due to a lack of financial support and opportunities – which consequently forces the state to bear the costs of dealing with the effects. In fact, this is also the reason why the state has to take up a job guarantee scheme focused on these sectors. The indirect effects of the scheme have the potential to drive down costs due to social issues. There are many such sectors with these indirect benefits that will be explored in the next article of this series.
From a socialist perspective, the reliance on the private sector for large portions of the economy is an unsustainable reality of many nations, particularly those in developing countries. We must stop relying on tax money alone, as capital owners are capable of using whatever means to reduce the amount of tax they need to pay and are often successful – due to their control over the means of production. Forcibly taking over their property notwithstanding, an elegant solution to seizing their power is through setting up state-owned and people-controlled entities which can compete with private firms that removes their labour force. At a certain point, the economy would then acquire a diminished tendency on private entities, allowing for taxation and other means to force them to comply.
This is where the job guarantee scheme comes into play as the first step. In the short term, this will force private firms to improve their offering to the labour force. In the long term, it will transform Malaysia from its over-dependence on private entities as we move to become a state with a people-controlled economy. It is also a moral imperative for the state to implement the jobs guarantee scheme, as the responsibility to guarantee a good quality of life to the people rests on the shoulders of the state. We, the people, must recognise our worth and push for this scheme as well. Otherwise, we will only be faced with more nonchalance by the state as we have seen during the lukewarm implementation of the COVID-19 care schemes and the recent assistance during the nationwide floods.
What jobs can we create?
Whilst there is an argument to be had about the many other sectors within society that can be developed to create jobs, there are necessarily those which should be prioritized and developed sooner than others. The decision of selecting which sectors those should be, comes down to a few factors but primarily revolve around identifying the ones that would most directly and quickly produce tangible socioeconomic benefits. The prioritization of these sectors is not to undermine the others as unimportant, but to set them up for success by ensuring that the jobs guarantee scheme is economically sustainable and produces enough surplus to later sustain the remaining sectors. PSM identifies the following sectors to be expanded with the scheme:
- Social Work
- Green Industry
- Health Infrastructure
- Medical and Pharmacological Research
- Care Work and Early Childhood Education
- Socialised House Work
- Accountability and Oversight
- Infrastructure Maintenance and Conservation
From these, the first two sectors will be elaborated down below.
According to statistics from Professor Dr. Abdul Shukor Juraimi, a lecturer in the Agricultural Faculty of University Putra Malaysia, Malaysia only produces 71% of the rice, 66% of the fruits, 40% of the vegetables and 29% of the livestock that is consumed locally. Accordingly, the value of food imports stands at around RM 50 billion. With this in mind, agriculture should be expanded through government-owned farms. These can be focused on producing staple foods such as rice, potatoes, vegetables, onions and other necessary crops. Putting forward the fact that ruminants (cows) require a lot of land and resources to raise, we can focus on the staple foods that are necessary for a balanced diet, i.e. rice and vegetables. Further, the farmers and workers employed should be guaranteed a minimum wage and an additional allowance, depending on the percentage yield of each farm with the crops guaranteed to be bought by the state to replace imported crops.
With these steps, we will be able to achieve the following. One, we will decrease the amount of money spent on importing foods. These savings can be channelled as investments into the agriculture job guarantee scheme to expand it even further. Two, we will ensure the food security of Malaysia. With so much dependence on imports, Malaysia is vulnerable to spikes in food prices due to disruptions in supply. These can range from failed crops and trade disputes to wars such as the Russian invasion of Ukraine. This can disproportionately affect the sovereignty of Malaysia as well with regard to ensuring adequate supplies of food for the rakyat. With this in mind, it is only logical that agriculture for food be expanded for local supply.
Poverty alleviation is another extremely important reason to consider when discussing job creations. Malaysian society is beset with the underpaid and overworked. Many Malaysians unfortunately fall through the cracks of society’s welfare systems and tackling this successfully would necessitate dedicated social workers who are on the ground to recognise and solve the people’s problems. One example is the experience of residents in PPR flats. Many flats are owned by wealthier people who rent out their units for very high prices. The majority of people who qualify to get PPR flats are not considered due to an opaque system and obstacles for these people to apply for housing schemes (e.g., due to the lack of digital knowledge or internet access).
Dedicated social workers on the ground are able to identify the needs of the poor and uplift communities. This can be modelled after China’s successful poverty alleviation project that managed to eliminate extreme poverty at the end of 2020. An estimate of 98.99 million people living in the rural areas of China within 128,000 impoverished villages and 832 designated poor countries were uplifted by a sophisticated program. This specific program was multidimensional in nature, including Two Assurances and Three Guarantees (assurances for adequate food and clothing and guarantees to compulsory education, basic medical services and safe housing). The backbone of this scheme were the dedicated social workers sent to these rural areas to identify poor families and to understand their needs deeply – a plan in which Malaysia is also capable of executing.
The socioeconomic implications of such a program may allow more people to participate in the local economy, boosting it from the initial investment into social workers whilst dramatically improving the quality of life for a larger group of people. With the specific needs of the masses fulfilled, people can go out and participate in their surroundings – buying and selling products, volunteering and fulfilling their spiritual needs; all which bolster not only the economy, but also the most important resource for a country, its people. Those who are empowered will not fall into social ills such as drug use or gangsterism, further increasing local security and decreasing associated costs like better healthcare and repairing damaged public amenities.
Funding the Job Guarantee Scheme
Along with all the good ideas stated above, we must keep in mind that the fundamental challenge that needs to be tackled in its implementation is the funding of the jobs guarantee scheme. Below, we suggest certain measures that can be implemented as funding sources:
Trimming procurement spending
Former auditor-general Tan Sri Ambrin Buang noted that public procurement is one of the most vulnerable government activities that is susceptible to corruption and therefore presents a complex problem which covers a wide range of illegal activities. Tens of billions are estimated to be lost from monetary leakages and poor procurement practices. Former Deputy Prime Minister Anwar Ibrahim speculated that upwards of RM 20 billion was lost due to corruption, wastage, and money laundering.
An example of the misuse of funds in procurement is displayed in the Shah Alam Hospital – Sunshine Fleet Sdn. Bhd. (SFSB) project done through direct negotiation instead of an open tender. The project incurred a loss of RM 68.53 million after SFSB failed to carry out construction of the hospital, which was expected to carry a capacity of 300 beds. The project was later transferred to Gadang Engineering (M) Sdn. Bhd. in 2011 with a new contract price worth RM 410.87 million. This is just one example. Fixing the financial leak could result in a direct transfer of the money to fund the JG (Job Guarantee) programme.
Modern Monetary Theory
Modern Monetary Theory (MMT) operates on the principle that governments controlling their own currencies can create the money they spend, and they can create as much of it as they want. The key limit to MMT is not the amount of money a government has, but rather excess inflation.
MMT scholars have stated that the JG programme has a built-in inflation control mechanism. JG replaces the NAIRU (non-accelerating inflation rate of unemployment) with the NAIBER (non-accelerating inflation buffer employment ratio). When the BER (buffer employment ratio) is high, real wage demands will be correspondingly lower. If inflation exceeds the government’s announced target, tighter fiscal and monetary policy would be triggered to increase the BER, which entails workers transferring from the inflating sector to the fixed price JG sector. Ultimately this attenuates the inflation spiral. Likewise, instead of a buffer stock of unemployed being used to discipline the distributional struggle, the JG policy achieves this via compositional shifts in employment.
Engaging in MMT could potentially assist in ensuring that there will be adequate funding for the JG programme in Malaysia.
Introduction of taxes that have been abolished could also be the answer to funding JG. There is no exhaustive way to explore every possible taxation measure that could be implemented in order to fund JG. The following suggestion is illustrative in nature.
Reviving the inheritance tax could be reconsidered in order to provide a portion of the funding for JG. Imposing an inheritance tax on estates worth above a certain threshold amount could allow for a potential revenue generation stream. If the repealed tax code regarding inheritance law was used as a guideline, it would still be welcomed – as it taxes estates worth above RM 2 million at a rate of 5%, and the rate goes up to 10% for anything above RM 2.4 million.
The current economic system in Malaysia has a large percentage of the economy being controlled by Government-linked Companies (GLCs) and Government-linked Investment Companies (GLICs). As state-owned firms, these would be natural extensions of the state that can be used to boost employment opportunities.
However, many of the GLCs and GLICs behave like private firms and are not used to their full potential. These types of companies, particularly PETRONAS and our banks, should be brought together to consolidate their profits. Profits that can be subsequently used to invest in developing and expanding key industries, as highlighted above. In the fiscal year of 2019, the profit after tax generated by PETRONAS alone amounted to approximately RM 40.5 billion – with Maybank at RM 8.2 billion, Tenaga Nasional at RM 4.45 billion, Axiata at RM 1.46 billion, and Sime Darby at RM 0.948 billion. Accounting incomes for GLICs like the Armed Forces Fund, the EPF and the Khazanah Nasional Berhad, this amounts to billions of ringgit available for aggressive internal investment. In addition to this, assets in foreign countries can be divested from, particularly those which are undesirable such as fossil fuel plants, to liquidate even more capital for internal development. Whilst this may result in lesser overall capital initially, the knock-on effects from the creation of jobs will remedy that in due time.
Arveent Kathirtchelvan is Chairperson of Socialist Youth, Parti Sosialis Malaysia