Why is MARC against the new minimum wage level?

Effective May 1, the statutory minimum wage will be increased from RM1,200 to RM1,500. The impending hike is expected as the Minimum Wages Order goes through a review every two years.

“However, the quantum of the hike in percentage and value terms – at 25% and RM300 – is unprecedented. Furthermore, the hike comes at a time when the Malaysian economy has yet to fully recover from its worst economic crisis since the 1997 Asian Financial Crisis,” says MARC.

The analyst firm says it is concerned about the exemptions under the Minimum Wages Order 2022.

“We are concerned about the exemptions under the Minimum Wages Order 2022 and the grace period given to micro, small and medium enterprises (MSMEs). The exclusions would blunt the favourable wage growth impact in the sectors and industries mentioned above and subsequently diminish the very objective of imposing a minimum wage level, i.e., to protect workers against unduly low pay in the lowest income bracket. In essence, exclusions mean that the statutory minimum wage level is higher than what it is in practice,” it says.

Minimum wage should remain lowest pay?

“We believe that the minimum wage level should be, as the name suggests, set at the lowest pay level across economic sectors, workers and regions. We also think it is better to focus the minimum wage rate based on an hourly basis, rather than monthly,” it says.

MARC also believes the minimum wage should not be used as a policy tool to substitute for policy efforts aimed at promoting wage-enhancing real economic activities.

In other words, infrastructure investments and economic liberalisation should eventually bridge pay gaps between employment sectors, as well as economic disparities between geographical regions, it says.

“In the final analysis, getting the minimum wage level right is paramount because, among other things, it can only go up, and never down. It is important to note that wage growth through legislative means is unsustainable and may even impede structural wage growth,” it adds. More @WorldFuture