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Here’s a money question, should Malaysia increase the minimum wage?

Published on 07 June 2018|
1 min read

The announcement of a rise in minimum wage was welcomed by many, but we need to look at its impact all round.

by Stanley P, Carrybeans

In the age of new Malaysia, people are abuzz with the 10 Promises in 100 Days that Pakatan Harapan promised to Malaysians. One of those promises was a review of the country’s minimum wage.

A step in the right direction for Malaysia

If you aren’t aware, Malaysia did not set up a minimum wage for labourers, at least not until 2012. Back then, workers in Peninsular Malaysia earned at least RM900; those in Sabah and Sarawak earned a minimum of RM800 every month.

Since then, the minimum wage has been increased once — to RM1,000 and RM920 for workers in Peninsular Malaysia and East Malaysia respectively.

Credit: Pakatan Harapan

For the 14th General Election, our current government promised to standardise and increase the minimum salary for all Malaysians. However, we were expecting an announcement on this anyway since a council representing the government, employers, and workers must review the rates every two years.

“The review of minimum wages this year was already anticipated by the employer community as the minimum wages order is to be reviewed at least once every two years in accordance with the National Wages Consultative Council Act 2011 (Act 732). The review will be conducted by the [National Wage Consultative Council (MPGN)] which comprises of the tripartite body, with MEF as the recognised employer representative.”

– Datuk Hj. Shamsuddin Bardan, Malaysian Employers Federation (MEF) Executive Director

The plan to standardise the minimum wage is part of Pakatan Harapan’s 10 Promises in 100 Days manifesto, in which they promised to increase the minimum wage to RM1,500 across the board. However, the fulfillment of the promise, along with several others are said to be delayed until the country’s financial situation stabilises.

New minimum wage by August

Human Resources Minister M. Kulasegaran / CreditSaw Siow Feng, Malay Mail

Before you wallow in sadness, there’s a good news. The Human Resources Ministry announced recently that they are planning to set a new minimum wage for private sectors this August. Human Resources Minister M. Kulasegaran said the National Wage Legislative Technical Committee (JTPGN) has completed its review process and are waiting to recommend a new minimum wage.

So, while we may not get the RM1,500 minimum wage yet as promised, we will still get an increase nonetheless. However, not everyone is rejoicing over the news.

Several employers have raised concerns over the announcement of   Executive deputy chairman and managing director of Sime Darby Plantation Bhd Tan Sri Mohd Bakke Salleh reportedly said that increasing the minimum wage to RM1,500 will have a negative effect on the plantation industry where the labour cost’s contribution to total production cost will increase to 35% from 26%.

How does the minimum wage change affect Sabah?

It is true; increasing the minimum wage by a large amount and doing it suddenly without understanding its impact can result in negative impact. Employers may have to cut down labour costs to offset the increased costs of production. This may result in the downsizing of companies, especially small and medium enterprises.

In addition, the increased minimum wage may force business owners to employ more foreign workers or outsource  the job to other countries where the labour cost is much lower. According to Shamsuddin, increasing the minimum wage translates to a higher cost of doing business which will cause more employers to hire illegal labours.

“The higher cost would encourage the utilisation of illegal foreign workers in Sabah, where there is a high number of illegal immigrants from the Philippines, Indonesia and others,” he told Carrybeans in an email. He added that streamlining the minimum wage across both East and West Malaysia would result in higher costs of business for local companies.

Prioritising purchasing power over higher income

Credit: Pixabay

On the other hand, however, increasing the minimum wage can translate to increased labour productivity and greater purchasing power by consumers. This will boost Malaysia’s GDP and create more jobs in the country. In addition to that, increasing the minimum salary may help reduce the poverty rate in our country.

At the same time, though, we have to focus on increasing the Malaysian’s purchasing power rather than income alone. Planning is essential.

“MEF welcomes the position of the Government which has placed purchasing power over high income. High income would only lead to inflationary prices of goods and services. Increases in income alone will not have any positive impact on the economy.”

– Datuk Hj. Shamsuddin Bardan

To increase or not to increase

So, should we increase the minimum wage or not? The thing is that both sides of the arguments are correct. In the long run, we must definitely increase the minimum wage.

However, proper research and review by all parties involved is crucial. Besides that, it is also important that we don’t make these changes drastically. Increasing the salary that workers earn is a good thing, but it must be done gradually or it could hurt us more than benefit us.

Featured Image Credit: Pixabay

The practice of working for eight hours came to be is due to something called the eight-hour day movement. Read all about it here.

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