Hafezali Iqbal Hussain, an associate professor at the Faculty of Business and Law at Taylor’s University, said a living wage had previously been described as elusive by some, given Malaysia’s economic context of high production with low-cost labour.

However, he told FMT it is still possible to implement it with policies to enhance the labour market, especially in helping the unemployed seek employment and providing ample opportunities for re-skilling and up-skilling.

Last week, deputy human resources minister Awang Hashim said the government was studying the implementation of a living wage for all sectors, after opposition MP Nurul Izzah Anwar asked whether Malaysia would be looking into introducing such a scheme, similar to that practised in Australia and Luxembourg.

He said the government first needed to consider the capability of employers to pay the living wage.

Hafezali said Malaysia’s reliance on cheap labour as the country’s main competitive edge for foreign and domestic investors had caused a lag in raising wages.

“Industries have relied heavily on low-skilled foreign workers to increase productivity by working longer hours rather than raising productivity through investment in mechanisation, automation as well as adoption of digital technologies,” he said.

Therefore, he said, there were a few hurdles in setting higher wages, especially for micro-SMEs that were mostly unable to absorb the higher costs.

The move may also set off a monopoly effect, including low-skilled workers getting displaced and losing their jobs if their higher wages were not coupled with productivity gains.

This could potentially lead to a greater divide where some workers with greater demand or skills would earn higher wages, while others would be laid off or would not be recruited.

Economist Geoffrey Williams of the Malaysia University of Science and Technology (MUST) said a living wage could be part of a universal basic income (UBI), which took into consideration different groups who cannot work to earn an income, such as pensioners, the disabled and fresh graduates.

He said the delay in implementing this in Malaysia was the “push-back from groups who view this simply as raising the minimum wage”.

“The UBI can actually be funded from multiple sources – income from employment, untaxed income from savings and side-businesses, and additional government cash aid of varying amounts given as top-ups, so people’s income can reach the set UBI rate.

“It should not be viewed simply as raising the minimum wage, for example, which would just cause unemployment and make poverty worse.

“Meanwhile, those already earning above the UBI level would not get top-ups, but would pay tax as normal,” Williams said.

What would a living wage here look like?

Bank Negara Malaysia (BNM) had previously defined the living wage as the level of income needed for a household to afford a minimum acceptable standard of living.

In 2018, the central bank had estimated that the living wage in Kuala Lumpur for a single adult was RM2,700, while for a couple without a child it would be RM4,500, and for a couple with two children, it would be RM6,500.

BNM estimated that more than a quarter of households in Kuala Lumpur were earning below the living wage.

Hafezali said a living wage must generally be sufficient to meet a worker’s basic needs, ranging from nutrition, housing, childcare and education to savings, as well as having some additional discretionary income.

“This needs to be earned by working normal working hours.

“Ideally, it would be high enough where no more than a third would be devoted to meeting housing costs.

“In the Malaysian context, given the different cost structure within the national geography, it is likely that it would differ based on localities and cost of living, especially in the context of housing costs,” he said.

He said household size would also be an important factor, as poverty data showed that a large majority of households living below the poverty line tended to have four or more members.

Williams said that aside from helping people achieve a minimum standard of living, it would help economic development by raising standards of income, and making low-pay unacceptable.

“It may also motivate higher standards in business, investment and employment opportunities,” he said.