Minimum wage and rising living costs


THE lowest monthly rate for workers in the peninsula is RM900 or an hourly rate of RM4.33, according to the Malaysian Minimum Wages Order 2012, orginally decreed to start on January 1, 2013.

In the East Malaysian states – Sarawak and Sabah – as well as the federal territory of Labuan, the lowest monthly rate is RM800 with the hourly rate at RM3.85.

Although the minimum wage rates were set on July 16, 2012, workers started getting paid only on January 1, 2014.

For a country to be able to embrace a national minimum wage policy for both the public and private sectors, it must have attained a viable level of national economic development and success. In this context, Malaysia has admittedly moved ahead in comparison with many countries in the same region although it is still far behind the developed nations in North Asia and the west.

The question of implementing a national policy on minimum wage had met with resistance, partly due to fears it would drive away foreign investors and partly due to certain sectors of the industry being not quite ready for it.

However, there were also some commentators who said the government was moving a little too slowly in implementing the policy and that sometimes, it tended to be over-protective of business and industry, fearing higher wages would make Malaysia less competitive and slow down foreign direct investments (FDIs).

Regardless, the fact that the government had set a minimum wage for employees in the hospitality, textile, electronic and safety sectors was generally a welcomed development, pointing, as it did, to the fact that the government does recognise that  eventually, having a national policy on minimum wage for the industry is necessary.

The minimum wage for several other sectors had also been studied by the National Wage Council and instead of allowing the industry to set a blanket minimum wage rate, the recommendation was to adopt a sector-by-sector approach.

The need for a national policy on minimum wage should be clearly understood. While it’s important to recognise that investor interests have to be considered and safeguarded to ensure competitiveness, the same should apply to the rights of workers.

It’s to be noted that there has been a big jump in the costs of living since the minimum wage rates were determined in 2012. Despite this, the rates have remained static.

Some quarters are calling for a review of the Minimum Wages Order, claiming that operators of micro businesses may face problems paying minimum wage at the sanctioned rates.

Economists say this could be remedied perhaps by an employer-employee “profit-sharing” arrangement, especially for small contractors, small holders, restaurants and the like.

What this means is that the take home wage will depend on the monthly earnings and the quantum should be mutually acceptable to both employer and worker. It is suggested the employer should be entitled to 50 per cent of the profit while the rest to be divided among the workers. Or perhaps, some other formula could be agreed upon.

There is another school of thought that businesses should re-think the payment of large wages to CEOs and management as is happening in some so-called developed countries – and as a rule of thumb, it should be no more than five times the wages of the lowest paid worker or those getting minimum wage.

But to all intents and purposes, this is not likely to happen as the wheeling and dealing world of big business is deeply entrenched in the “grab-all” Wall Street mentality.

Malaysia could reappraise the minimum wage rates – say, every six to 12 months – as living costs have escalated and will continue to escalate since payment of minimum wage came in effect at the beginning of the year.

The country has apparently reached a certain level of technological sophistication. So the growing pressure for better worker remuneration is understandable. Failure to respond in the appropriate manner could result in the flight of semi-skilled and skilled workers.

This should be the greatest concern because once the smart ones leave, it may be difficult to entice them back. And the economy will be the poorer for it.