Stagnant minimum wage in Malaysia needs urgent reforms
There has yet to be a definitive response regarding which countries have the lowest minimum salary globally.
Nonetheless, Asia and Africa are, without a doubt, the two continents with the lowest minimum wage levels worldwide.
According to research by e-commerce company Picodi Malaysia, Malaysia is ranked 59th out of 67 nations. The Minimum Wage 2024 study states that the average monthly income for minimum wage earners in Malaysia was RM1,323, representing a constant zero per cent increase from January 2023.
The research also revealed that a monthly basket of essential food goods costs RM437.58 for Malaysians at the minimum salary. This indicates that the cost of a basic food basket, which ranks 48th in the list, is 33.1 per cent of the minimum wage. It was recorded at 30.6 per cent of the minimum wage at the start of 2023. This indicates that the rise in Malaysia’s minimum wage needs to keep up with the rising cost of food.
Considering that the National Wages Consultative Council Act requires that the council reviews the minimum wage order every two years, it is imperative to remember that it has been nearly two years since the minimum salary was established at RM1,500 on May 1, 2022.
As Human Resources Minister Steven Sim mentioned, the government will evaluate the minimum pay this year, in compliance with the National Wages Consultative Council Act of 2011. This will be done by considering the opinions of all relevant parties, including employers and employees, as well as socioeconomic assessments like those provided in the Bank Negara report.
As reported by the World Bank, Malaysia is among the nations with the lowest household savings rates worldwide. Approximately 50 per cent of workers in this nation lack financial resilience, with young workers being particularly affected.
Given the growing cost of living and the minimum wage’s ability to reduce poverty, providing lower-class workers with an additional amount can help them meet their basic needs and survive. Theoretically, many impoverished individuals might escape poverty if wages were raised.
The Economic Outlook 2024 study states that increasing salaries by employers is necessary to address Malaysia’s productivity issue. This is because the problem of low wages in Malaysia is typically associated with the productivity issues facing the economy, with the implication being that companies need to hold off on raising pay until productivity increases.
In the medium to long run, if the wage policy is made necessary and specifically targets certain sectors and occupations, it will contribute to higher salaries and increased productivity – as long as worker-based training is provided.
To break free from the cycle of poor productivity, low profit, and low wages, Malaysia has to make a determined effort to increase salaries to combat the cheap labour model that underpins company expansion.
As such, policy interventions in the labour market are necessary and have been recognised as critical to enhance pay outcomes, increase low-income workers’ earnings, and lessen wage disparity. In addition, wage increases must be welcomed by employers and enterprises in particular, to alter business and the economy.
A minimum wage law may be an effective tool for labour market and macroeconomic policy. In addition to raising worker pay, well-planned and executed policies that assist them will improve domestic effective demand and contribute to closing the income and earning gap.
The long-term economic advantages, and the beneficial social effects of increased minimum salaries must be evaluated against any potential short-term negative effects. This is particularly so that those in lower income categories can escape poverty and enjoy better lives, which is the purpose of wage increases.
Datin Seri Professor Dr Suhaiza Hanim Dato Mohamad Zailani is the Director of the Ungku Aziz Centre for Development Studies, Universiti Malaya.
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