Keeping minimum pay in new system avoids shocks, says economist

 

An economist says regular reviews of the RM1,500 minimum wage should be done to cope with inflation and the rising cost of living.

PETALING JAYA: The government’s decision to retain the minimum wage of RM1,500 in the progressive wage system next year will avoid “unexpected shocks” to the labour market, according to an economist.

Universiti Malaya senior lecturer Goh Lim Thye said the minimum wage had gone into effect only in May last year. Maintaining it for the near future could provide stability for businesses, while avoiding “unexpected shocks” to the labour market.

“A RM1,500 minimum wage alongside a progressive wage system could encourage skills development and career advancement, while still providing workers with a baseline wage,” Goh told FMT.

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However, he said it was important for the government to make regular reviews of the minimum wage to take into account factors such as inflation and the rising cost of living.

Last week, human resources minister V Sivakumar announced that the progressive wage system would be practised in tandem with the minimum wage of RM1,500. The government said the new system would provide for gradual and phased wage increases to keep pace with economic growth.

The Social Protection Contributors Advisory Association Malaysia said retention of the RM1,500 minimum wage was an insult to workers. It said big businesses which managed to persuade the government to continue with this “exploitative system” would see it as a victory.

The labour rights group pushed for the minimum wage to be set at a decent income level, and for any type of productivity bonus to be in addition to the minimum wage.

Universiti Teknologi Mara senior lecturer Firdausi Suffian told FMT he was surprised to hear that the minimum wage would stay within the progressive wage system.

He had expected the government to increase the minimum wage to RM2,700, the level which a 2018 Bank Negara study had shown to be the income for a worker to live a decent life.

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However, he said he understood the government’s decision, as new investors might not be favourable to a rise in the minimum wage.

“On the other hand, if you increase the minimum wage on top of the progressive wage system, then you will have very productive workers,” Firdausi said.

He added that the government should consider making the progressive wage policy a requirement for all private companies to follow in the long run to protect low-skilled workers who would benefit from salary increments.

The national economic action council had previously stipulated that the progressive wage system would not be mandatory for all private employers in the initial stages.

Last Thursday, economy minister Rafizi Ramli said the new wage system was expected to begin in April or May. - FMT