Customise contracts for better wages, says economist

KUCHING: Centre for Market Education (CME) economist Carmelo Ferlito has called for better employment contracts that link individual wages to company goals with greater transparency.
He suggested that wage increases ideally come from direct talks between an employee and their employer instead of using a progressive wage model (PWM) policy.
PWM is a wage structure to uplift workers’ low wages through upgrading skills and improving productivity.
“A one-size-fits-all plan does not suit a free labour market,” Ferlito pointed out.
“Every worker is unique and has different skills. Their pay should reflect this.”
“The talk about ‘progressive’, especially among ministers and public, is still unclear and needs more clarity,” he added.
Ferlito’s comments came after Economy Minister Rafizi Ramli, recently said he would talk with everyone involved about a progressive wage plan.
Rafizi planned to get ideas and views from the government, bosses, and workers. The final details of the new wage plan will be based on these talks. Things like how much it will cost businesses, when and how it will start, and agreement between the government, employers, and workers, will be considered.
Ferlito also noted that talks with labour unions sometimes neglect new workers.
“They often only focus on preserving what they already have,” he said.
“I’ve seen this become an issue in many parts of the world. Effective talks should occur directly between a boss and their employee. Such discussions should be fair and not put anyone at a disadvantage,” he said.
The PWM, according to Ferlito, does not address the root issue of low-skilled workers. The constant supply of unskilled labour can lead to low productivity and suppress the market wage of low-skilled workers.
He also mentioned the difficulty for older low-skilled workers with the skill-linked part of PWM. Thus, a customised training programme for these workers is needed.
Ferlito questioned the notion that higher wages alone can boost an economy, arguing that the focus should be more on investment and savings, rather than just spending.
“The belief that higher wages alone can cause economic growth is flawed. True growth depends on investment and savings,” Ferlito clarified.
“In a place that fosters investment, wages can grow evenly. But, focusing only on wage growth could hinder investment and stall economic growth.”
He cautioned that a single-minded focus on wages, without support for investment, could hinder business creation and slow economic progress.
“Private investments have been sluggish, only making up 15 per cent of our economy,” Ferlito noted.
“To encourage balanced wage growth and more stable salaries, we need to foster more private investments. Increased investments can help businesses expand and create jobs.
This could increase the demand for workers and potentially lead to higher wages,” he added.