From Norsyahrin Hamidon
Wages are an important part of the economy. They are a source of income for workers and also help to drive economic growth. The government should adopt a broader approach to wages, taking into account the importance of wages in the overall economy. This would help ensure the government’s wage policy is effective in promoting economic growth and reducing poverty.
The Malaysian government has announced that it is pursuing a Progressive Wage Model (PWM) similar to that of Singapore. This is a positive step, as the PWM has been shown to be effective in raising wages and improving the working conditions of low-wage workers in some sectors in Singapore.
The Singapore PWM is currently being implemented in four sectors only: cleaning, security, landscaping, and retail. In these sectors, the wage rule covers not only low-wage jobs, but also higher positions like supervisors and managers. The PWM sets a basic wage (minimum wage) for each occupation in the sector and stipulates the wage increment amounts and schedules, which employers must comply with.
So in these respects, Singapore’s PWM has good features that Malaysia should adopt. However, it is not a silver bullet. The government must not abandon the existing minimum wage system as our minimum wage policy is a necessary rule for all jobs across all sectors, not just a few.
Malaysia’s minimum wage policy aspires to ensure that all workers are paid a living wage, though we still have a long way to go.
A living wage is the minimum amount of income that a worker needs to meet their basic needs, such as food, shelter, clothing, and transportation. In Malaysia, it is estimated that a single adult would need about RM2,600 to live in the Klang Valley, based on studies by Bank Negara Malaysia and EPF. EPF’s BelanjawanKu suggests that the average living wage for a single adult in 2023 should be about RM2,300. It is clear there is a big gap between the minimum wage and the living wage.
EPF’s BelanjawanKu also suggests that the average living wage for a married couple with two children is about RM6,000. It must be noted that the living wage is in fact the household income where there is about an average of two income-earners per household (or 1.8 to be exact).
Based on the statistics department’s median household income data, about 51% of households earn below RM6,000. In other words, more than half of Malaysians are living below the living wage.
The government should set a clear goal of ensuring that the majority of workers will eventually earn above the living wage. For instance, in the mid-term review of the 12th Malaysia Plan, the government could set a goal of only 40% of households earning below the living wage by 2025, and only 10% by 2030. This will provide a clear overarching goal of the government’s wage policy.
About four million workers earned less than RM2,000 in 2020 and benefitted from the minimum wage policy and its cascading effects. However, the cascading effect of the minimum wage does not improve the mid-range wages of another four million workers who earn between RM2,000 to RM6,000. Despite the implementation of the minimum wage in 2013 and several increments, a worker who earns a salary of RM2,500 may not receive any proportionate increments as employers are not obligated to raise their salary. This is probably one good motivation for us to adopt some of Singapore’s PWM’s features.
It is clear that, in the long run, the government needs to adopt a broader approach beyond the minimum wage and beyond some improvements based on Singapore’s PWM.
This could include measures such as reducing the number of foreign workers, encouraging workers to unionise, promoting collective bargaining, and resetting our industrial and investment policies.
In my opinion, our industrial policy in the last few decades is the biggest reason why our wages are low. On the other hand, higher wages can be the most important factor in shaping our industries and commerce, moving away from being labour-intensive, low-technology and dependent on foreign workers.
Norsyahrin Hamidon is the chairman of the Malay Economic Action Council (MTEM).
The views expressed are those of the writer and do not necessarily reflect those of FMT.