Hourly-based minimum wage better for both sides, says economist

 

Developed countries such as Australia, New Zealand and the US employ the hourly-based wage model, says economist Firdaos Rosli. (Bernama pic)

GEORGE TOWN: An economist has proposed that Malaysia adopt an hourly-based minimum wage rate instead of the monthly-based system, saying it is better for both employees and bosses.

MARC Ratings Bhd’s (MARC) chief economist, Firdaos Rosli, said an hourly-based minimum wage provides flexibility to workers, especially those in the low-income bracket, to maximise their earnings.

“Let’s say a worker earns the minimum wage. If he wishes to improve his productivity by working additional hours throughout the week, his wage would still start at RM1,500 because that is the contracted amount.

“With an hourly-based wage rate, the worker can put in additional hours over the week to earn more. Basically, an hourly rate improves the worker’s ability to earn,” he said, when commenting on the new minimum wage which came into effect yesterday

Firdaos Rosli.

Firdaos said an hourly-based minimum wage rate would also help workers achieve better work-life balance since they would be able to work fewer than 40 to 45 hours a week while earning a minimum wage.

For employers, an hourly-based model would be more cost-effective as they would be able to pay workers less than RM1,500 but still comply with the law, he said,

The hourly-based minimum wage system is practised in developed countries such as Australia (A$14.54), New Zealand (NZ$13.18) and the US (US$7.25).

Economist Geoffrey Williams, of the Malaysian University of Science and Technology (MUST), said the hourly-based minimum wage model had its pros and cons.

Geoffrey Williams.

On the one hand, he said, an hourly-based minimum wage model would give employers and employees greater flexibility.

“This can help in budgeting for firms to keep salary costs manageable, and they can release the employees who work shorter hours so they can also work with other employers.

“However, this depends on flexible working relationships and contracts to enforce. It’s a sort of gig economy where the minimum pay is guaranteed,” he told FMT.

On the cons of the hourly wage model, Williams said it could lead to wage suppression.

“The downside of this flexibility and hourly rate approach is that hours can be cut, sometimes arbitrarily,” he said.

“So, take-home pay would be below the minimum wage and workers would be in poverty pay conditions with uncertain hours and wages each week or even each day.

“This would defeat the social safety net purpose of the minimum wage.” - FMT