Analysts: Wage rise to equalise gap between Peninsula, East Malaysia

The research firm expects a solid increase in employment of medium and high-skilled workers as well as bright prospects for continuous solid wage growth in 2018 and in the long term. — Bernama photo

KUCHING: Analysts view the gradual rise in the national minimum wage will have positive impact on Malaysia’s economy by equalising the wage gap between Peninsular Malaysia and East Malaysia.

MIDF Amanah Investment Bank Bhd (MIDF Research) believed the decision to equalise the wage between Peninsular Malaysia and Sabah and Sarawak will reduce income gap between the two regions.

Comparatively in 2017, the average median salary for Peninsular Malaysia is RM2,015 while Sabah and Sarawak are RM1,782. This translates roughly to a 13 per cent gap between median wage for Peninsular and East Malaysia, it said.

“The percentage changes of minimum wage for both Peninsular Malaysia and Sabah and Sarawak are lower than the previous two revisions to the minimum wage levels,” it said in a special report yesterday.

“For instance, minimum wage growth of 2016 as compared to 2013 for Peninsular Malaysia and Sabah and Sarawak are 11.1 per cent and 15 per cent respectively. Comparatively, the 2019 minimum wage sees five per cent and 14.1 per cent uplift respectively for Peninsular Malaysia and East Malaysia.

“Therefore, we opine the new minimum wage level has trivial impacts toward business activities in Malaysia via changes in cost structure.”

MIDF Research went on to highlight its belief that 2019 will particularly boost wage growth in Sabah and Sarawak.

Currently, there are four states that recorded double digit growth last year namely Melaka, Sarawak, Pahang and Terengganu.

“Overall, wage growth across all states registered better performances as compared to the previous year, 2016 in which only Kelantan recorded double digit growth,” it added.

“As mentioned earlier, new scale for national minimum wage as promised by the government will benefit employees across all states in Malaysia for the next four to five years.

“In addition, accommodative tax policies and stable fuel prices would provide extra rooms for businesses to invest and expand its business activities from low to high-value stages. Under the same manifesto, the new government promised to prioritize local workers and reduces the number of foreign workers.

“Consequently, we expect a solid increase in employment of medium and high-skilled workers as well as bright prospects for continuous solid wage growth in 2018 and in the long term.”

Malaysia’s median wage grew on nominal term by eight per cent to RM2,160 last year. MIDF Research said this growth was in tandem with solid expansion in domestic economy in 2017.

“Moving forward, we foresee wage growth to stay on upward trajectories due to steady upbeat momentum in global trade activities, gradual recovery in crude oil prices and supportive economic policies.

“The recent increase and equalization in the 2019 new minimum wage will lend further support on steady overall wage growth in Malaysia in the short and long terms. We view there would not be sharp rise of RM500 over a year.

“The increment is expected to take place gradually over the next five years,” it concluded.

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