Wages are an important part of the economy. They are a source of income for workers, and they also help to drive economic growth. The government should adopt a broader approach to wages, which takes into account the importance of wages in the overall economy. This would help to ensure that 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 rules cover not only the lowest-wage jobs but also jobs of higher position such as supervisors and managers. The PWM works by setting a basic wage (the minimum wage) for each occupation in a sector; and also stipulating the wage increment amounts and schedules required for the subsequent 5 years employers must comply with.
So in these respects, there are good features of the PWM 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 floor wage rule for all jobs covering all sectors not just a few.
Malaysia’s minimum wage policy aspires to ensure that all workers are paid a living wage, however 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, the living wage is currently estimated to be around RM2,600 per month for a single adult in the Klang Valley, based on Bank Negara and EPF studies. EPF’s BelanjawanKu suggests that the average living wage for a single adult for the country for 2023 is 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 2 children is about RM6,000. It must be noted that living wage is in fact household income where there are about an average two income recipients per household (1.8 to be exact). Based on the DOSM median household income data about 51% of households earn below RM6,000. In other words, more than half of Malaysians are living below living wage.
The government should set a clear goal of ensuring that the majority of workers will eventually earn above living wage. For instance, the government could in the Mid-term Review of the 12th Malaysia Plan set a goal that by 2025 only 40% of households are below the living wage thresholds, and by 2030 only 10%. This will provide a clear overarching goal of the government wage policy.
There are about 4 million workers earning below RM2,000 in 2020 which benefit from the minimum wage policy and its cascading effects. However, the cascading effect of the minimum wage rule somehow does not improve the mid-range wages between RM2,000 to RM6,000 which involves another 4 million workers. Since 2013 the year the minimum wage was implemented, despite several increments of the minimum wage, a worker who earns a salary of RM2,500 may not receive any proportionate increments – as the employers are not obligated to raise his salary. This is probably one good motivation for us to adopt some of Singapore PWM features.
It is clear that in the long run the government needs to adopt a broader approach beyond the minimum wage and also beyond some improvements based on Singapore’s PWM.
The broader approach may include measures such as reducing the number of foreign workers, encouraging unionization of workers, and promoting collective bargaining and also resetting our industrial and investment policies.
In our opinion the industrial policy of 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 foreign workers.
Norsyahrin bin Hamidon
This is the opinion of the writer and does not necessarily represent samudera.my