I just downloaded THIS app to start managing my monies better. It’s pretty unique and good actually. I have a few goals for next few years and I’d like to achieve them all. Let’s hope this app can help me achieve these goals.
Since we are on the subject of budget, I am a bit torn with a few items in the recently concluded 2020 budget tabling by LGE our Finance Minister.
Overall, I feel it’s a populist budget. Most people get something from the 2020 budget. It’s for the masses. Middle income get some, B40 gets the most, and everybody is happy now that the rich are taxed more. Be it only 2000+ of the filthy rich folks impacted, it will still make a good headline for the masses to feel good about it. A populist budget means the government wanted the Rakyat to feel good about the administration. The Rakyat has been feeling anxious and unhappy with the performance of the administration the last year or so. This populist budget will probably get the administration a few points up, in the approval rating.
I’m feeling pretty good about many of the stuff that was announced. Some of the opposition politicians said the budget had nothing significantly new. Many of the initiatives are carried over from BN era apparently. Well to that I say, why fix it if there’s nothing wrong. PH main beef was with Najib, many other policies have proved to be successful, so continue lah. It’ll be stupid to change something that’s working well. Just change what’s not working well and that’s Datuk Seri Najib and his cohorts.
So to keep up with the spirit of typical Malaysians, whom does not comments on good things, and just comments super hard on the not so good things, let’s get the ball rolling.
First up, the Minimum Wage. Government will increase the minimum wage to RM1200 for select major city. I’m going to assume major cities will be Klang Valley, Penang and JB.
Let me get this out first, I believe we should have less government intervention and more market forces decided on things. I agree that there should be government intervention, but it needs to be kept at a minimum.
So, when the government announced higher minimum wage, I’m not a happy camper. We are just buying time to satiate the rakyat with easy money without increased productivity. Market forces dictate that one should only pay when one gets the value that one wants. In the case of minimum wage, the employers get the same output/productivity but it costs more now. That is not economically viable and against the law of economics. Market will eventually correct itself.
Imagining running a business and you get this increased costs out of nowhere but productivity remained the same. How will the business compensate to the increased costs? Increase the price! That’s the easiest. It’ll be easier since the market now have surplus of money due to the increase in minimum wage.
Very quickly, the market will adjust to the increase in costs with an increase in price. Give it 3-6 months to adjust, probably by April or June of 2020. The Rakyat’s buying power will then be back to where it was before. The rakyat will not get intended increased buying power and the business will then get back their normal profit levels. But prices of goods and services have since increased.
Another unintended impact of higher minimum wage is automation. Look at some of the places in the world where minimum wages has become so high that businesses can no longer afford to hire minimum wage worker. The businesses resorted to automation. Robots instead of chefs/cooks to cook the food, drones to send the pizzas instead of riders. Conveyor belts and robot arms to pack stuff at the warehouse instead of packing worker. Robots vacuum cleaner to clean up the floors at offices instead of your typical auntie cleaner. These are minimum wage jobs with minimum wage tasks.
Here are some examples we have in KL, look at many McDonald’s outlets we have around the city. They now have ordering kiosks, some outlets have three of them installed and some have up to 5 kiosks. Who are these kiosk replacing? Yup, minimum wage cashier. Now we only see one cashier manning the counter.
Another example, Pump attendant, back in the 90’s we have pump attendant. Nowadays with cashless payments and automated pump, we no longer need the minimum wage pump attendant workers.
In the more developed countries, we have ROBOTS FLIPPING BURGERS! Take a read in that article and see for your self a robot flipping burger patties.
Let’s take a look at San Francisco, California. Here, the minimum wage is a whopping USD12 per hour. How much money is USD12 per hour? Let’s do the Big Mac meal set comparison. A Big Mac meal set in Bay Area, SF, is USD5.99. Working for an hour there can get you 2 Big Macs meals. So, working for an hour will get you 2 meals for the day.
Let’s do the same calculation in KL. RM1200 a month is about RM5.77 per hour. A Big Mac meal set in KL costs RM14.95. You need to work for 2.6 hours before you can get a single meal.
Comparing San Francisco Bay Area and Kuala Lumpur, the minimum wage if California is super duper high lah, we can say that kan. That is why my friends, they have robots flipping burgers. These robots cost less than a human being, at USD60K per robot, the cost is the same as 20 months of minimum wage salary + some benefits of probably valued at about 20% of the salary. Benefits like annual leave, hospitalisation and medical, EPF and etc.
This means after 20 months, the robots now works for free. Robot don’t do mistakes, they cook perfectly, they don’t complaint, they don’t take breaks, they don’t ask for 15 minutes solat break twice a day on top of the 1 hour break. Best of all, robots don’t get sick as often and don’t go on annual or maternity leave.
Have you ever had Costa Coffee brewed by the robots in those Shell Select Petrol Stations? They taste the same almost every time you get them right? Compared to Starbucks sometime too sweet, sometime too bland and sometimes the Frappuccino ice is too chunky and sometimes not. Some of you argued that you need human to interact and whatever lah, when was the last time you spoke to the baristas brewing your coffee? While using the McDonald’s kiosk and did not even miss the human cashier you had interacted back in the days. In fact, you are glad that you had the kiosk because it’s way faster than having a newbie cashier taking you orders oh-so-slowly and sometimes with errors.
I might be talking too much into the future but sometimes we forget that the future is not that far off. Look at that family picture you have in your purse or wallet or on your office table, yeah, it’s been more than 10 years since you got married. Time flies.
Alright, let’s take a look at the second not so good things about the 2020 budget. Let’s take a look at it in a separate article I’ll post tomorrow. I feel this is getting too long already. I need to write shorter articles and get to the point faster. Lots of my readers only skimmed through the articles and they feel it’s too long. If you managed to read up till this paragraph, give yourselves a pat on the back and give a comment on what you think below or on my FB/Twitter/LinkedIn page and I’ll send you Domino’s Pizza discount codes as a token of my appreciation. I got a few extra and these have expiry dates and limited quantities. Be fast yah.
Peace be unto all.
p/s: If you have time, read up on what Andrew Yang, the next presidential candidate for USA have to say about automation industry.
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