Known as the progressive wage model (PWM), it defines a salary scale tagged to skills and experience. It entails giving skilled and experienced workers a starting salary that is more than the RM1,500 minimum wage now in place in Malaysia.
An academician in Singapore, where the PWM has been in place for some time now, has described it as a “minimum wage plus” model.
A recent statement by economy minister Rafizi Ramli that Malaysia is considering the PWM has drawn contrasting responses from employer and employee groups.
For employees, clarity is key. This is essential to ensure that employers adhere to agreed upon prerequisites particularly in terms of salaries, Malaysian Trades Union Congress (MTUC) president Effendy Abdul Ghani told FMT Business.
Employers, on the other hand, fear that it will have a negative impact on business if not properly implemented.
Effendy said that for the employee, it is important that how he climbs up the salary scale is clearly spelt out.
“The government will have to make sure that there are efficient monitoring and enforcement measures in place,” he added.
The impact on employees
The PWM can have a big positive impact, Effendy said. “By ensuring that people are paid a salary that is commensurate with their abilities, income disparity can be narrowed and poverty rates reduced,” he pointed out.
He said the promise of higher wages would also motivate people into acquiring wider knowledge that is relevant to their work.
“Every step up the salary scale should correspond with a higher level of knowledge and experience. This will ensure a clear path for professional advancement,” he said.
At the same time, Effendy said, the process of promoting an employee from one level to the next should be regularly updated.
He said the PWM is best for sectors with a high proportion of low-skill workers and where there is also a high risk of exploitation and unfavourable work conditions.
He cited the retail, hospitality and food services sectors as prime examples.
Effendy also warned that getting employers to adhere to the agreed upon pay structure could be difficult.
A business perspective
Small and Medium Enterprises Association (Samenta) chairman William Ng said the PWM can be beneficial in some ways.
He told FMT Business the PWM can be feasible as long as employers are not pressured to raise the minimum wage.
“A further increment in minimum wage in the short term (next five years) will be highly disruptive to business and our economy,” he said.
He said it is also important that the PWM is not made mandatory regardless of the intention or improvement in productivity.
“Wages must continue to be market-driven, until all stakeholders develop the discipline and understanding that it must not be used as a political tool,” he added.
What yardstick to use?
Under the Workforce Skills Qualification (WSQ), Singapore’s national credential system, an employee rises from one rung to the next on the salary scale upon his acquiring the necessary qualification.
Ng said a Malaysian equivalent already exists in the form of the Sijil Kemahiran Malaysia (SKM).
“The SKM is a robust system that also takes into account prior learning and experience so it is not necessary to create a new system,” he said.
Ng said many legacy laws, including time-based labour regulations, must also be reviewed.
He said Samenta had previously proposed a special task force on the future of work to solve problems such as skills mismatch and underemployment.
Effendy agrees that a central qualification model is necessary to standardise training and encourage employees to upskill themselves.
However, he said, stakeholder cooperation is essential in creating applicable and efficient training programmes.
“There is also a need for data on earnings, skills and employment in various industries and this data can be utilised to assess the impact of PWM to enable the required modifications,” Effendy said.
“To ensure success, proper planning and coordination between employer and employee is essential,” he added.