The Minimum Wage Dilemma

Not too long ago there was a call for the government to enforce a minimum wage for workers in Malaysia in the effort to curb poverty. At first glance setting it at RM750 for example, shouldn’t be a big issue. That is until you consider a number of factors.The minimum wage law has been adopted by a lot of western countries especially in Western Europe. In these countries a worker in ensured a minimum wage so that they are able to survive given the cost of living at the time. In some countries they are given unemployment allowances which means that if they cant find a job, they can get allowances so that they wont be begging on the streets. This sounds good, but sometimes people do misuse it as an excuse to be a bum.The enforcing of minimum wages gave quite a good to the industry in the sense that employers are more thorough when hiring an employee, they really appreciateĀ  a good employee and employees are seen more as an asset of the company rather than mere workers. sounds great doesn’t it?

Here in Malaysia while it’s easy to choose the populist path by announcing minimum wages, there is a chance that if a minimum wage is set, the poor might be even worse off than without the minimum wage.

Arguments against the enforcement of minimum wage

One of the main arguments of not supporting minimum wage comes from business owners. With minimum wage, it means they have to fork out more money to pay their workers. A few things might happen because of that. First, the employer might have to lay down a few workers because he cant afford to pay them anymore. This means the poor will go from little income to no income at all. Even if they maintain the workers at the higher salary rate, the price of the product or services they offer will go up. So, that’s not good either.

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.

In fact there are calls to enforce a maximum wage in contra with a minimum wage where the government sets how high salaries can go for high ranking workers, but surely, nobody wants to make that unpopular decision.

The parties affected

I’m sure a lot of employers struggle to justify paying a street sweeper RM750 of minimum wage when he is now paying RM400, if the ruling is passed. But then again not all sectors are affected. Let’s say the minimum wage is set to RM750. The companies affected would most probably come from the low skilled sector such as maids, cleaning services, restaurants and estate workers. I mean even electronic factory workers can earn up to Rm3000 a month and contract workers from the construction industry earn even more than that. So you wont see any increase in production costs if the minimum wage is enforced.

Which brings us to the question of how much should the minimum wage be? The government once suggested RM750 while the opposition once suggested RM1400 if I’m not mistaken. Either one, it’s still below the p0verty line.

But if either one of the amounts are put as the minimum wage it still will not concern those getting a pay more than the minimum wage, namely the middle class. So if the minimum wage means a price hike in their teh tarik and nasi lemak (restaurants will be affected by minimum wage), who in their right mind would agree to it.

What the problem really is

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.

So what can we do?

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.


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