Pay increase to achieve High income status?

The Star carried a news report today that a Deputy minister said this:

A pay increase for over one million civil servants is one of the key ingredients in ensuring the success of the New Economic Model (NEM)….

He said this was to ensure that the NEM’s objective of transforming the country from a middle-income economy to that of a high-income would improve the public sector’s productivity, thus ensuring successful development.

“Singapore shifted to a high-income economy several years ago by setting high pay for civil servants, which has succeeded in improving its economic performance.

“So civil servants in this country cannot be ignored,” he said

I thought that was a very simplistic view of how to transform Malaysia from a middle income country to a high income country.

Increasing the pay of the civil servants without increasing the productivity and ensuring that there is a matching growth of the economy will only make the country incur more debts.

Say if there is an  increase of pay without increase in economic activity and growth, the operating budget of the government will increase , and this increase will either come at the expense of the smaller development budget or making the budget deficits bigger. If the budget deficits is bigger, then we need to borrow more to fund the deficits, and ultimately the country will be in a bad financial state. If the development budget is smaller, then we cannot fund projects to stimulate our economic expansion.

It is like a company suddenly raising the staff’s salary across the board without any increase in its revenue and profits. So whatever increase will be from either its reserve or borrowing. This will ultimately affect the balance sheets and the shareholders will suffer .

If the solution is so simple, then even Nigeria, Myanmar would be HIgh Income countries by just increasing the pay of its civils service and forcing its private sectors to increase pay for all Nigerians or Burmese.

We need to increase our economic activities and growth so that we enlarge our tax revenues, making the nation and the government richer in order to pay our workers higher salaries and thus move up the Economic ladder. There is no shortcut to this!

Singapore is a total different case altogether. They pay higher salary to their civil servants because they have the best in their civil service, and their economy was growing much faster at that time when they raised the civil service’s pay. The pay increase matched the productivity increase.

This cannot be said of our civil service where not everything , from recruitment to promotion, depends on meritocracy. In Malaysia, we still have the crutch syndrome and this is a direct opposite of meritocracy. Without meritocracy, ow are you going to attract the best brains into civil service? If the best brains are not in civil service , then how are you going to compete with private sector, no matter how high you raise your salary?

The whole idea ( to increase pay to make the country a high income country)is naive and does not make much sense to me. A high income country depends on innovation and knowledge, and i think we have not done very well in both these areas.


22 Comments (+add yours?)

  1. mykantree
    May 10, 2010 @ 15:15:37

    Dear Dr Hsu. This D.Minister’s statement is a classic example of the type of Ministers and Deputy Ministers that this country is burdened and cursed with.

    I wonder which is the case here?

    1. The DM is just one ignorant half educated fellow.
    2. He is just his usual stupid self.
    3. He is just reciting a text/speech prepared by one of his equally ignorant and stupid Ministry’s staffer.
    4. He thinks that generally Malaysians are too stupid and ignorant to know what he is talking about anyway.

    Maybe he is just all of the above.


  2. klm
    May 10, 2010 @ 15:47:27

    Indonesia is a high income country. It civil servants are paid in millions of Rupiah. Unfortunately, things are also priced in millions of Rupiah.

    This government is infested with brainless idiots.


  3. Richard Loh
    May 10, 2010 @ 16:22:42

    They are GAGA ministers. Just look at how Hishamuddin demonise the women on Mother’s day and the dpm talking about Sarawak development for the next ten years without answering why nothing is done for the past 47 years.

    Sarawak Sibu P212 By Election – Hard Talk 4


  4. CYC
    May 10, 2010 @ 16:24:08

    Welcome to the Club of Greece.

    Greece is bankrupt partly because of its bloated civil service with higher salary (and keep rising) than private sector staffs but lowest in terms of productivity. See, it mirror our beloved Malaysia’s current scenario. Only difference is our civil servants pay still not higher than private sector staffs.

    We have the PIIGS in Europe now and the virus seems spreading to Malaysia if this honourable DFM who had worked as a senior BNM officer successfully sells his brilliant economic theory to Najib. Real Kangkung PhD. Sama macam KTK.


  5. CYC
    May 10, 2010 @ 16:39:44

    I wonder will they term this approach as Najibnomic’s principle No. 1. And how would we rename the PIIGS decease? PIIGS is not allowed. Perhaps change to DICKS as the proposer’s name has the word Adek.

    But he is not the first to think along this line. Our education ministry has practiced this for decades hence we produced so many high achievers over the years by awarding generous “Higher” grading to graduates in order to achieve Higher Educated Society. Is this a threat to the Gelakan elitists? No, they share the same genes.


  6. KLL
    May 10, 2010 @ 18:14:34

    Gee..and we have such mentally-challenged person as the deputy finance minister…scary scary.


  7. Idris Rahman
    May 10, 2010 @ 21:37:46

    Don’t compared with Singapore civil servent.They are effiecent,hard working,smart,and 99% corrupt free.Ours are slow,tidak apa attitude,ineffiecent and 99% corrupted.How to justify high income to them when they have this type of attitude and low productivity???


  8. disgusted
    May 10, 2010 @ 23:09:38

    Now you guys believe me when I raised before that our ministers are brain-less and bankrupt of intelligence.

    The proof is in the eating of the pudding and so, this proof ultimately comes from the brainless horse’s mouth.

    So another example, to ensure this country gets more graduates, lower the marking and give A1s to 90pc of the students, we can boost the numbers.

    Everything is made simple here, Want votes, buy them.

    Weaken Opposition. Buy them. Lower criminals, shxxt them. Complaints and dissent, jail them

    So what are we to do? Vote them?


  9. Tim Teo
    May 10, 2010 @ 23:16:54

    PM Najib is no more brilliant. Similar approach he had announced. He suggested to raise our country’s income by raising our Ringgit value last year. This idea analogous to increasing price of goods but without increase in demand of goods. They are a bunch of idiots from even from thier top leaders. Najib even graduated as an economist. He doesn’t understand simple supply and demand. How can these people run a country?


  10. stevent
    May 10, 2010 @ 23:47:54

    If this is the case then Zimbabwe would have been the riches nation with the most effective civil servants as the currency denomination has reach trillions.

    DPM is saying this because the next GE is on the horizon. This is inline with the GST as the nation elites are running out of cash to feed themselves. I hope that PR would be well prepared for this.

    Time for economics. Najib is going with the strong ringgit strategy for our economy. Personally, this policy would be a great one if our nation is already developed. However this is not the case so the unintended consequences would be severe as global conglomerates would just pull their manufacturing out of malaysia. If that is not the case then there will be hardly any wage increase for our middle class. Inflation would hit us with the easy credit being available globally right now. Of course the elites in this country would generously welcome this policy as they would have more spending power to buy LVs and sport cars.

    Just as Hulu Selangor byelection has shown, our population is not mature enough to embrace meritocracy and democracy. Credential wise, only a handful of politicians, if not at all has the qualifications of Zaid. Our people still prefer money politics above all else and their votes can easily be bought. If the opposition thinks that BN cannot offer that ‘much’ goodies during the GE, then they are blind with their own arrogance. If Zaid could get 80% of the Chinese votes then the election would have been his. Sadly this is not the case. Is there still hope?


  11. Allen Lee
    May 11, 2010 @ 02:19:33

    when government pay for RM30k to buy a RM3k laptop from their ‘respective’ RM2 crony’s company. How do we have money to develop the nation. When the salary increase, the price for good and service will also increase. If anyone still remember, we did have this happen before sometime ago.

    The conclusion is that as long as current political party in-charge the government with it’s corrupt system. There is nothing can be done to safe the nation to become another Greece.

    Tun Mahathir 22 years reign had turn the government into the corporate entity of robbing the nation’s wealth. Until now he is still the one who is pulling the string behind. Now that Anwar is free and actively lobbying the international influence and strengthen the opposition. Tun M legacy is at risk. He and his puppet government will bring Anwar down at all cost. All have nothing to do with the welfare of the people and the future of the nation. Never in the first place.

    All the show of change and popular decision is just a perception race to ‘buy’ the vote of the rural folk which have 10k people for 1 parliament sit. They know they can’t buy the urban folk and it doesn’t matter anyway because they are in the 1 parliament sit with 50k people.


  12. soul survivor
    May 11, 2010 @ 07:48:02

    the solution is to whack umno out for good!there are tooooo much leakages in our economy!we can still save this country.however and whichever macroeconomics machanics u applied would never work as long as u keep all the umno corruption-infested rodents manage our wealth!!


  13. Fu Qihua
    May 11, 2010 @ 08:55:01

    Dear Dr.

    What can we say?

    You need three workers in Malaysia to do one man’s job.


  14. CYC
    May 11, 2010 @ 11:45:12

    Elementary mindset minister offering elementary solution. Gelakan leadership portraying gelakkan comedians. PhD my foot ! All Gelakan elitists are no more than a bunch of cowards with little ability to think strategically. Am I too much with this comment? No, I m willing to go lower to waken them from their dream. Why, I m a nobody thus i need not put on a suit and pretend to be gentleman when I wanted to scream at some dishonest faked souls.

    Status quo is not an option but an escapism thought. How would u want your next generation to live cannot be compromised as what your parents did sometimes ago. Migration also another type of escapism. How would u want your predecessors to continue migrate from one country to another (except by choice)?


  15. chabalang
    May 11, 2010 @ 13:29:06

    Sigh…Malaysia really have a lot of ??? Ministers compared to Singapore. Just take a look at the CVs of our ministers versus Singapore ministers.

    Of course, we pay everyone MORE and create hyperinflation -> MYR will collapse…

    If we continue to have such leaders – Malaysia will definitely go the Greek way…


  16. klm
    May 11, 2010 @ 15:02:42

    This pay increase will have to depend on increasing productivity. Remember the how famous how many TNB people do you need to change the light bulb question.

    Below are variations of this question.

    Q: How many civil servants does it take to change the light bulb?
    A: 45. One to change the bulb, and 44 to do the paperwork.

    Q: How many Princeton graduates does it take to change a light bulb?
    A: Two. One to mix the martinis and one to call the electrician.

    Q: How many Lunatics does it take to change a light bulb?
    A: Two, one to change the light bulb and the other to tell him to make sure he sticks his fingers in the socket first, to see if the electricity is switched on.

    Q: How many Accountants does it take to change a light bulb?
    A: What sort of answer did you have in mind?

    Q: How many lawyers does it take to change a light bulb?
    A: How many can you afford?

    Q: How many doctors does it take to screw in a light bulb?
    A: That depends on whether it has health insurance.

    Q: How many philosophers does it take to change a lightbulb?
    A: Three. One to change it and two to stand around arguing over whether or not the lightbulb exists.

    Q: How many cops does it take to change a lightbulb?
    A: Five: One to screw in a new bulb, and four to beat the crap out of the old one.


  17. pilocarpine
    May 11, 2010 @ 16:07:19

    i think d fella who said this not really implementing anything… he’s just saying that to boost (fool) those gullible civil servants who sit on their fat asses who will cheer loudly as they read this piece of shit, err.. i mean news..

    or just another gimmick to sway the civil servant’s of sibu


  18. CYC
    May 11, 2010 @ 16:27:11

    The writing is on the wall. But our dear “friends” in Gelakan are still dreaming in wonderland. How much money could rake in by sleeping together with UMNO for few more nights? Being screwed at the back makes no difference from the front. Its the same prostitute profession and it must be done professionally. U get paid better or with a bonus for a satisfactory performance that please your client -UMNO.

    We should not complain as they seems enjoyed doing this since 20years back. This was validated by LKY with his beggars theory and now reinforced by KTK’s backdoor philosophy. So, how could KTK still support the prosecution of Anwar base on back door hypothesis since he also entered through the same hole.

    klm is right when u pointed out the Princeton grad need 2 person to change the bulb. It applies best to Gelakan as while they mix the martini they expect someone else to do the donkey job and accrue the credit to themselves. Got brain ma, who say no brain.

    悲 – 学不致用的饱学之士, 虚有其名之政党。 以民施政还是施愚民之政。


  19. klm
    May 11, 2010 @ 17:34:02

    CYC. I am glad you got that dig on Princeton grads.


  20. Cadraver
    May 13, 2010 @ 01:22:54

    A recent (or two) articles of opinion from the Malaysian Insider seem to have shown that should current wages increase for workers across the board (although the article seems to concentrate mostly on security guards), unemployment would rise, because companies will not be able to pay their employees the heightened amount and will be forced to lay off a good number of their staff in order to do so.

    Fair enough, I would say. Better to have a low-paying job, rather than having no job at all.

    However, I would have to add that many workers in the country aren’t paid wages that are of a respectable amount. Factory workers may find themselves going home with a RM600 pay cheque, security guards with RM450 a month (according to the article) whilst plantation workers will earn even less, at RM400 to less.

    An image I’ve seen once has even suggested that certain rubber tappers go home with RM200, or even less than RM100 (don’t ask me to produce it, I lost the source). How is this a respectable amount, which is a mere pittance, and not enough for an individual to feed him/herself, much less a family.

    It’s easy for armchair critics and economists to oppose a minimum wage, but when you’re on the lower end of the spectrum, trying to survive from a day to day basis will be the only thing in their minds.

    What would you suggest, Dr. Hsu? Sure, our economy isn’t growing -in fact, it’s actually decreasing- but surely some of these people would deserve something of a higher pay rise.

    Otherwise, it may encourage many to turn to crime; and in this case, crime might actually pay a lot better.


  21. Dr Hsu
    May 13, 2010 @ 13:46:23

    There is a case of setting a minimal wage for the lowest paid workers. I agree that many of them were paid much much less than their productivity warrants it.Many of the factories are making big money, but the remuneration is only a small portions of its total revenue and profits. So these companies can and should raise the pay for their workers.

    There is in fact a case for arguing for a minimal wage…

    But the same cannot be said of our civil service which is bloated like the Greek civil service. And like the Greek civil service, there is a lot of corruptions and abuses; just read the yearly Auditor General reports , and you get an idea of how they spend the tax payers’ money.


  22. sosong
    May 15, 2010 @ 22:35:36

    high income?? indonesian getting millions of rupiah, vietnamese getting millions of dongs, lao ppl getting millions of kips, iranian getting millions of rial?? zimbabwe ppl, lagi best, trillion of dollars previously in january 2009
    so these countries, must be very rich lah?


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