The progressive wage white paper describes a wage subsidy programme rather than the game-changing reform many were hoping for.

It will also be many years before we see it. With a pilot from June next year and evaluation results most likely after Budget 2025 in October, amendments and debate might push the roll-out to 2026.

The exact progressive wage model (PWM) is unclear but the aim is to enhance skills and productivity so the wages of people who otherwise cannot expect higher salaries can be raised.

Apart from low-skilled workers, many high-skilled workers will also benefit.

But skills and productivity are not the only nor the primary determinants of wages or income. Care-workers, early childhood teachers or social workers are highly skilled but often paid very low wages.

Objectively low-skilled internet influencers, fashion models or even politicians often earn high incomes.

Wages are often based on hours worked rather than the value of what is produced. They are also heavily influenced by the power of employers to keep wages low.

Since there is also no objective or transparent measure of productivity to establish whether the PWM has worked or not, employees will not know whether they deserve a pay rise based on productivity improvements.

They will be in no better position to push for a pay rise than they are now. This is why we have the PWM and minimum wages in the first place.

The minimum wage has raised the salaries of low-paid workers but those on slightly higher wages have not seen their incomes rise as a consequence because the labour market is segmented.

So raising the minimum wage will not raise middle-income wages. This is why the PWM is being applied to wages above RM1,500.

Eventually the minimum wage will have to rise to keep pace with the cost of living because it is already at poverty levels. This will be delayed pending the PWM implementation. So the poor will continue to suffer in the meantime.

More broadly, the economic impact is mainly due to extra consumption from the wage subsidy, not increases in productivity.

There is also an increase in tax collection and the number of taxpayers. So whatever is gained in higher wages may be quickly taken away in higher taxes.

At the company level, the payments to employers are made retrospectively which means they have to carry the cash-flow in the meantime and risk non-payment if their audit is not in shape. This is a barrier to smaller firms.

The skill-raising training is linked to incentives so companies may send people to courses to claim the incentives whether or not they add value.

Ironically this would reduce productivity during the time spent training. It is linked to government approved training which channels money from PWM employers to preferred trainers.

Despite this, the PWM as a wage subsidy is justified in cost-benefit terms because the RM2 billion cost is small compared to the one million people that might benefit. To scale it up is also inexpensive if care is taken to stop it ballooning.

While we wait for the PWM and even if we finally get it, the government will still need to change the rules of the game by reforming labour laws and empowering workers to take on more flexible work and even multiple jobs to top up their income without being bound to one employer on low wages.

The market is already doing this as millions of people take gig-economy jobs and side hustles to increase their earnings. This must be encouraged, empowered and valued rather than being seen as second-class work.

The views expressed are those of the writer and do not necessarily reflect those of FMT.