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Malaysia to Impose Minimum Wage Policy Soon

Malaysia has reportedly set a minimum wage policy for the first time in the country’s history. Here are some online reactions. Jacques believes that it is a move in the right direction:

Minimum wage increases the standard of living for the poorest and most vulnerable class in society, and will help stimulates consumption by putting more money in the hands of low-income people who spend most if not all of their paychecks. A good thing when you consider that Malaysian exports are expected to suffer this year because of the European debt crisis.

However, not many feel this way. Most people think that the reason for doing this is the upcoming general election, which is expected to occur sometime this year.

Workers in Kuala Lumpur. Photo from Flickr page of AkumAPRIME used under CC License

Workers in Kuala Lumpur. Photo from Flickr page of AkumAPRIME used under CC License

Hishamah thinks that while the idea has its merits, it has its flaws, too:

If the minimum wage comes in at around the RM800 level, I wouldn’t expect too much of a negative impact, at least not immediately.

But there will be a cascading effect on wages up the scale, which will raise both supply side and demand side inflation over time – if  a basic worker gets an effective 25% increase in base pay, you think his/her supervisor ought to be getting anything less? And that will raise wage costs, particularly in those industries which are sensitive to worker pay, i.e. services. So your teh tarik and roti canai are going to get a bit more expensive pretty soon.

Employers might also start being more wary over hiring as well as cutting benefits in-kind and allowances, so I’d also expect a minor increase in long term unemployment, though at RM800 it won’t be much.

As the minimum wage gets further away from the poverty line, you should expect both these effects – inflation as well as unemployment – to accumulate faster.

iMyn from Cekikdarah thinks that there are some setbacks to the implementation of this policy:

Then there is the usual problem in Malaysia, which is when salaries raise, everyone from the shop owner to the mamak stalls will raise their prices. The worker that just had a pay raise suddenly feels like been played. His pay raise makes no difference.

I think there are a few problems with Malaysia that doesn’t allow us to implement this minimum wage. First of all, we are still dependent on cheap labor. Most of the small businesses, small factories, plantations still rely on cheap labor to make a hefty profit. There are also a lot of foreign workers in Malaysia that can work more for less. For sure the employers of these foreign workers wouldn’t want a minimum wage enforced. Even worse, if the minimum wage is only enforced for locals, they would have stiff competition from cheaper foreign labor.

A solution would be education. The government should make sure every Malaysian has ample education and certification, including vocational certification. Once everyone has certification, the government can then enforce wages according to certification. This is also important in realizing the vision of becoming a high income nation. The nation must have an educated, high skilled workforce and not merely cheap labor because whatever the country, not many can compete with cheap labor from the emerging markets such as Vietnam, Indonesia and now Myanmar, who has just joined the show.

Outspoken former Prime Minister Dr Mahathir Mohamad have also been quoted saying that this policy will bankrupt Malaysia, which in itself have copped criticism from some bloggers, among them Khoo Kay Peng, a politician:

It is a shame for him to say that the implementation of minimum wage may bankrupt Malaysia. We say that the RM100 billion wasted during his tenure for bailing out failed projects, cronies and through corruption is highly likely to bankrupt Malaysia.

His stupid project such as the crooked bridge at the Johor causeway, Proton, MAS, Perwaja, Bakun, dodgy defense procurement, Cyberjaya, Putrajaya, F1 race and others had wasted billions of federal coffers. He had preferred to waste financial resources on wasteful and mediocre projects and allowed people of resource rich states such as Trengganu, Sabah and Sarawak to remain poor and destitute.

On Twitter, many were retweeting news articles on the issue, and some voiced their opinions through the social networking site as well:

@gowriey: Minimum wage gap? Malaysia needs minimum work ethic gap and minimum education standards gap.

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