Sunday, February 19, 2012

Volume 4 Issue 7: Intelligent Investing

Civil Service Wages - One Step Forward, Two Steps Back

Another way to put this is that the government is not only shooting itself in the foot. It is also shooting Malaysia in the face. 

In the guise of "raising" public sector wages, the government had once again served the interests of the people in the top echelons of public service:
The Malaysian Insider understands that Putrajaya wants to completely overhaul the scheme which only seemed to benefit top civil servants but many of an estimated 2,000 senior civil servants have already signed and consented to the new scheme, which guarantees a pay rise of some RM5,000 a month.
Can you believe that some of the civil servants are guaranteed a pay rise of RM5,000 per month? The increase alone is more than most of our monthly incomes. Get this:
The proposal, which sees the highest pay at RM60,000 a month for the Chief Secretary to the Government while those in lower pay grades would receive an increment as low as RM1.70, has ignited anger and disapproval in the 1.4 million-strong civil service — a key vote bank for the ruling Barisan Nasional (BN) coalition — ahead of a general election that must be called by May 2013.
 I don't know how RM1.70 is going to make any difference in a person's life. Clearly the plan was well-thought out. So not only are the "rich" rewarded, but the poor are being marginalized yet again. As if the problem of inequality isn't bad enough.

Long ago, I had already recommended a "wage policy" that was simple and transparent:
It is now rampant that local graduates these days can barely qualify for a job at an MNC, even with the current wage level. I have been taught by graduates with engineering degrees in my secondary school. That was almost eight years ago. The situation is that bad. If you increase the minimum wages in sectors with positive externalities, you could possibly create a productivity multiplier. More people would want to be in these areas. For example, if a teacher's salary were to be increased significantly, more people would want to become teachers. Of course the buck must not stop there. The pay for the people who actually train these teachers have to increase as well. This will result in two things. First, too many people will want to become teachers. Now, this may seem like a bad thing at first. But this is the most fundamental concept of life. Just think about how you were born. Millions of sperm going after one ova. The fittest will survive. In this case, only the best people will get to be teachers. I mean, look at doctors. When you talk to parents, they stereotypically want their children to grow up to be doctors, lawyers and whatever. Why? Because it is a high paying job and not many people get to become doctors.

This competition for survival will push for the selectivity of the people who actually qualify for the profession. Even with the failed-notion of meritocracy in our country (by that, I mean, not all the best people will be selected because of our quota system) there will be an invisible force to select the better few to perform an important job function. The majority of the people who want to become teachers would be sufficiently qualified and so would their trainers.

Now, the second result is where the positive externality comes in. I pause to make an assumption here. I assert that good teachers will increase the number of good students. With more good students who eventually become useful graduates and consequently productive workers in all industries, the economy of our country will be thriving. Think first world thriving.
This proposal also signals to the general public about what jobs does the government think is important. In my opinion, doctors and teachers should come first in order to maintain long-term growth sustainability. We need to keep our population healthy, and we need to keep our population competitive intelectually.

But it goes without saying that any wage increase has to come with proportionate improvement in productivity. And to do this,  the government or the statistics department has to come up with a proper way to measure productivity and collect data on it, just like the US. As I have shared before, one of Bob Parson's 16 rules of success is:
Measure anything of significance
When you start measuring anything and everything that you deem as important, then only can you measure your improvements. If you merely wish to "improve productivity", it does not make sense if you have no way to measure productivity.

All these are just preliminary steps that need to be taken to even come close to reforming the Malaysian economy and society in its path towards high income. All we are hearing now is just lip-service and half-hearted attempts (I also wrote about them in recently, here, here and here) at appeasing the public before the impending elections.