Malaysia Announces New Minimum-Wage Policy
Teo Cheng Wee – Straits Times
Kuala Lumpur. Prime Minister Najib Razak has announced a long-awaited minimum-wage policy for Malaysia, in a move that is set to benefit 3.2 million of the country’s lowest-paid workers — including Indonesian maids — while potentially boosting the ruling Barisan Nasional’s (BN) chances at the next general election.
These workers, who make up a quarter of Malaysia’s workforce, currently earn less than 700 Malaysian ringgits ($231) a month and live below the poverty line. They include security guards, as well as construction and plantation workers.
Datuk Seri Najib said yesterday, in a speech ahead of May Day, that the minimum wage will be set at $297 per month for workers in Peninsular Malaysia and $264 for those in East Malaysia. It excludes those in the domestic service sector, such as maids. Malaysia has been negotiating minimum wages separately for maids, most notably with Indonesia.
The new wages will come into effect in six months. They have been in the works since 2009, when Najib unveiled plans to move Malaysia’s economy away from a low-cost model and rely less on cheap labor.
“From a social perspective, this is the right thing to do, so that the most vulnerable groups aren’t taken advantage of,” said Yeah Kim Leng, chief economist of Malaysian rating company RAM Holdings. “It can also serve as a way of pressuring industries to restructure and go up the value chain.”
Considering the relatively small increment, Yeah believed there will not be a huge jolt to the system, though labor-intensive companies may be more affected.
Neighboring Indonesia, Thailand and Vietnam are among countries that have a minimum wage, which varies by area and sector. In Bangkok, the minimum wage is 300 Thai baht $9.75 a day, while in Jakarta, it is 1.29 million rupiah ($143) a month. Singapore does not set a minimum wage.
Malaysia’s minimum wage rates were set on the advice of the National Wage Consultation Council, which was created last year and comprises employer representatives, trade unions and government agencies.
Najib pointed out that in making their recommendations, the council had assessed economic conditions and taken into account the needs of businesses, “while ensuring that no Malaysian is left behind in the country’s economic progress,” he said.
“The lowest-paid will now be guaranteed an income that lifts them out of poverty and helps ensure that they can meet the rising cost of living,” he added.
With a crucial general election believed to be only months away, the announcement is also seen as an attempt by the BN to secure an important voting bloc. Polls have previously shown that the lower-income groups here were the most receptive towards the BN’s attempts to woo them with cash handouts and subsidies.
But Yeah felt that the policy could be a double-edged sword, as it could hurt small businesses as well.
Indeed, the Malaysian Federation of Employers (MEF), whose members collectively hire two million workers, said that it was feeling “jittery” for its smallest firms. About 200,000 of these small companies — some of which employ only a few workers and operate on tight profit margins — may be adversely affected, said MEF executive director Shamsuddin Bardan.
Najib said yesterday that most firms with five workers or less can defer the minimum-wage scheme for another six months. Shamsuddin said the federation had initially hoped for a three-year grace period.
“The government has said that companies that cannot cope can appeal for an extension,’ said Shamsuddin. “I expect many of them to do so when the deadline expires.”
Reprinted courtesy of Straits Times