Minimum wage a bold step forward
Posted on May 6, 2012, Sunday
PRIVATE sector workers in Peninsular Malaysia will now receive a minimum monthly wage of RM900 while those in Sarawak, Sabah and the Federal Territory of Labuan will get RM800.
This new wage policy was announced by Prime Minister Datuk Seri Najib Tun Razak on Labour Day (May 1).
The law takes effect six months from the time it is gazetted to allow industries to adjust accordingly. Non-professional services companies with fewer than five workers are given six more months to make their adjustments.
The minimum wage quantum is recommended by the National Wages Consultative Council.
It compares with the RM760 per month that represents the poverty income line and the gross pay workers take home in the manufacturing sector, and is also part of Malaysia’s plan to achieve high-come nation status by 2020.
Not altogether unexpected, the move does not satisfy everyone. It would be far-fetched to think it could.
The Malaysian Trade Union Congress (MTUC) Sarawak was among the first to question the allotment of quantum, arguing that since the cost of living in Sarawak is 15 to 25 per cent higher than in West Malaysia, a flat floor rate of RM900 should be standardised nationwide.
Social Development Minister Tan Sri William Mawan sees it differently, saying the quantum for Sarawak is ‘acceptable’ for now. His explanation is that standardising the quantum at RM900 may restrict the hiring power of local employers due to unaffordability which could result in retrenchment and a corresponding rise in unemployment.
His other concern is that even with minimum wage pegged at the higher ceiling all round, there is every possibility some employers, especially in the rural areas, would still continue to pay their workers as low as RM400 a month. He said this is what the MTUC should look into.
Human Resources Minister Datuk Seri Dr S Subramaniam has clarified that the difference in quantum was decided after the poverty level, median wages, cost of living, productivity rates and unemployment were duly considered through close consultation with the country’s financial intelligensia. This is quite straightforward.
Some quarters fear minimum wage will have an adverse impact on foreign direct investments.
The National Chamber of Commerce and Industry Malaysia is apprehensive a blanket minimum wage of RM900 and RM800 could frighten foreign investors away, especially for projects in the rural areas.
The contention is that the manufacturing sector and small and medium enterprises (SMEs) will not be able to cope due to their heavy reliance on blue collar and unskilled labour.
The chamber is, thus, inclined towards minimum wage based on location and living cost rather than a nationwide blanket implementation, reasoning that while a RM900/RM800 floor wage may serve the purpose of urban areas, the situation was bound to differ from location to location, particularly in the rural areas.
There have even been suggestions to fix the minimum wage at RM1500 with some politicians calling for the amount to be paid in their own states
To this, the Human Resources Minister said: “I’m sure their factories will close down.”
He stressed it would bode the country ill if politics were dragged into the implementation of minimum wage.
“There was no political influence in the National Wage Consultative Council as its technical committee comprised economic experts. It will be dangerous for the country if we politicise an economic tool,” he warned.
Dr Subramaniam also disclosed a committee would be set up with the task to bring the pay structure for certain industries in line with the minimum wage system. A study will be made through negotiations with all parties involved on specific issues vis-a-vis the absorption of some of the fixed allowances into the basic salary.
As the minister explained, a worker may get RM1000 in service charge but his basic wage may be just RM300. The committee’s task is to standardise the basic pay to RM900 (for peninsular Malaysia) and RM800 (for the two East Malaysian states and the Federal Territory of Labuan).
There are concerns minimum wage could spark a domino effect on the prices of goods and services. Such a possibility should not be discounted and the ministry concerned and consumer bodies must work together to nip the problem in the bud by dealing sternly with errant traders otherwise the purpose of having minimum wage will be rendered self-defeating.
With proper implementation, minimum (and higher) wage is likely to lead to greater economic growth and more business for companies. It will not just offset cost of living but also spur increased productivity.
Undeniably, the government has taken a bold step forward with the minimum wage system.
It is a start many Malaysians will be thankful for despite all the grouses and gripes.