Economists, industry groups hail new minimum wage

This article first appeared in The Edge Financial Daily, on September 7, 2018.
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KUALA LUMPUR: The government’s move to raise the minimum wage and standardise the rate nationwide at RM1,050 per month, with effect from January 2019, has been well received by economists and industry groups.

Institute for Democracy and Economic Affairs economist Adli Amirullah said the hike is in tandem with the rise in the median monthly salaries and wages received by the country’s employees to RM2,160 per month in 2017, from RM2,000 in 2016.

“Theoretically, the hike in the minimum wage should be at least 40% of the current national median salary. The current quantum is nicely in line, in our view,” Adli told The Edge Financial Daily.

At RM1,050 per month, or RM5.05 per hour, the new minimum wage is 48.62% of the median salaries and wages, he noted.

This would be the second increment since the minimum wage was introduced in Malaysia July 2013. The current minimum wage is RM1,000 a month in Peninsular Malaysia, and RM920 in Sabah, Sarawak and Labuan.

MIDF Amanah Investment Bank Bhd said standardising the rate will reduce the inequality among the states.

“We concur with the decision to equalise the wage between Peninsular Malaysia and Sabah and Sarawak as it could reduce the income gap between the two regions,” it said.

As for the impact on the industry, MIDF, which expects the overall wage to grow 5.3% this year, said the minimum wage is expected to have minimal effects, amid the cancellation of the goods and services tax, stable retail fuel prices and easing inflationary pressure.

The Federation of Malaysian Manufacturers (FMM) also hailed the new minimum wage. It described it as reasonable as it had taken into account the current challenging economic conditions and regulatory environment.

“Although it is unfortunate that the move to equalise rates across the country has to be initiated in one painful move resulting in a RM130 increase for employers in Sabah and Sarawak, the industry views the announcement as positive and would help alleviate, to a certain extent, regulatory burdens and their impact on the costs of doing business,” said FMM in a statement.

The Malaysian Rubber Glove Manufacturers Association said the rubber industry will take the new minimum wage scheme in its stride and its members will manage and factor in the necessary cost adjustments.

“The government is striving for an equitable and balanced solution for both employees and businesses,” its president Denis Low Jau Foo said in a statement.

Economist Tan Sri Ramon V Navaratnam noted that the new minimum wage may not be adequate for everyone throughout the country, especially in the peninsula.

“Maybe the government could have allowed some differential in the quantum, from region to region, catering to the cost of living,” the Centre for Public Policy Studies chairman said in a telephone conversation.

On the quantum of increase, Navaratnam said: “Everyone will say it is never enough, but I will say they can only adopt gradual increases, as a sudden hike will disrupt businesses.”

 Meanwhile, government lawmaker Charles Santiago said the RM50 increment in the minimum wage is an insult to the country’s 15 million labour force, claiming that it is disingenuous and contradicts Pakatan Harapan’s election manifesto.

“The insignificant increase, from the previous minimum set at RM1,000 in 2016, does not seem to take into account the rise in prices of essential goods and services,” he said.

Charles urged the government to reveal the findings by the National Wage Consultative Council, saying the council had recommended the new minimum wage to be fixed at RM1,250 per month, instead of the RM1,050 per month.

“And since the popular argument is that a higher minimum wage would force companies to close down and lead to unemployment, I also urge the government to provide proof to substantiate these claims,” he added.

Echoing Charles’ sentiment, the Malaysian Trades Union Congress (MTUC) has accused the government of betraying the nation’s low-income earners, particularly those in the bottom 40% (B40) household income bracket, claiming that the new minimum rate quantum was “a pittance dumped on labour.”

“The minimum wage [increase] of only RM50 [in Peninsular Malaysia] demonstrates the repeated pampering of businesses just like the former government while disregarding the B40 population’s rights to livelihood,” the umbrella union body said.