Wage-ing war against job cuts

For an economic dabbler like me, it seems perplexing to read of news that a growing number of international banks around the globe are cutting jobs by the thousands. And even more mystifying is when the bank had just recorded an increased profit. Aren’t these the same people that are supposedly skilled with balancing the accounts?

While we could sympathise with Barclays Bank’s decision to reduce its headcount by about 3,000 this year – it has a total of 146,100 people – as well as Swiss investment bank Credit Suisse’s plans to cut more than 2,000 jobs of its 50,700 full-time employees worldwide, both in an effort to control escalating costs and declining profits, the move by HSBC to follow suit was more dubious than that of its counterparts.

Unlike Barclay’s 33% drop in profits during the first half of the year, HSBC, Europe’s largest bank, is firing up to 10% of its staffs in Europe and the United States over the next three years despite turning in first-half pre-tax profits of US$11.5 billion (RM34.2 billion), an increase of 3% from the year before. To further add to the puzzlement, the bank in the same breath revealed that it would be hiring up to 5,000 people a year in emerging markets including in Asia and Latin America.

For the 30,000 workers in HSBC, this must be the most startling compensation for having helped their employer improve their revenue. They must surely now be cursing themselves for having not walked over to their rivals Standard Chartered before as the United Kingdom’s second-largest bank recently declared its intention to hire 2,000 people globally by the end of this year.

Okay, the banks coming under pressure from the present European sovereign debt situation, uncertain currency and commodity trading, as well as decreased revenues from fixed-income services, I can conceivably mask my feeble empathy. Now, when a local publishing company armed with a long-term multi-million government project in their books forces 380 of its employees to go unpaid leave indefinitely, that is not as easy to absolve.

Although Dawama Sdn Bhd, which was given a concession by Dewan Bahasa dan Pustaka (DBP) to print, distribute and market publications for a 12-year period, had allegedly received RM650mil in business from DBP over the past nine years, the publisher cited financial difficulties arising from an agreement dispute with DBP in justifying its move. DBP has since denied any misconduct on their part of the agreement.

“Attaining government projects are good, especially for our profile, but SMEs must not rely on them solely as you never know when things change. There may be changes in the political situation or changes in the management committee that could affect your business deals with them,” advised Wong, a 30-year steel parts manufacturer when met at an SME business-networking event.

Could this trend of layoffs by differing types of businesses be what those rigorous against the newly introduced National Wages Consultative Council Bill 2011 were worried about? This group argued that having a minimum wage policy reduces the demand for labour, increases unemployment and encourages layoffs.

They also claimed that particularly for SMEs, any increase in wages for their workers would directly mean higher labour costs, leading the SME to decrease its staff size in order to maintain its operational costs. As the other areas of their displeasure, including a single national minimum wage rather than base on regional, sector and class of workers as well as the influence allocated to the Human Resources Minister are outside of this column’s relevance, let’s zoom in on productivity involving SMEs.

On the matter of the minimum rate to be paid, Andy who runs a design and fabrication company in Subang believed that while he was not opposed to the plan, having a minimum wage would definitely increase his operational cost. He said, “I currently have a few staffs whom I pay below RM1,200 monthly (the rate proposed by Malaysian Trades Union Congress). So it’s either I have to do without them and get others to take up the workload or increase my HR costs.”

Online florist operator L.T said that the increased cost would be a burden to consumers. “Paying workers a minimum wage may push inflation upwards. The truth is that retailers like me would likely pass on the increase in costs to our costumers,” she admitted.

On the other side of the coin, supporters of the move, myself including, asserted that the policy would help raise the standard of living of about 3 million workers, combat poverty, and protect workers by preventing unfair wage practices by the local business community.

“It would be good for businesses. I think that it would help improve the morale of workers, reduce absenteeism and ease staff turnover in the company. This would be reflected in increased productivity for the organisation and keep its recruitment and job training costs down,” declared human resources consultant Nelson.

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