MINIMUM WAGE : WORKERS RIGHT VS EMPLOYEE'S READINESS

Malaysia Degist Com
16/3/2015

IN today’s fast-paced world, how many of us are actually willing to undertake unpaid work, or would not mind to accept a low-wage job amid skyrocketing living cost? While it is undeniable that there are still many altruistic souls in our society who selflessly help others on a humanitarian basis, but it is a fact that most employees are willing to toil and work tirelessly at average nine-to-five jobs for what they feel is valid remuneration for the work they do.

By definition, minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers or in its simplest term, it is the minimum amount of pay an employee should receive, according to government legislation.

Today, many developed countries in the world have some form of minimum wage and the implementation of minimum wage is often touted as a tool to reduce poverty and bridge the gap in income disparity, especially among low-income workers.

In Malaysia, we joined the league of countries implementing minimum wage in 2013. In the Budget 2011 speech in October 2010, Prime Minister Datuk Seri Najib Razak had announced the minimum wage initiative with the hope to create the necessary environment so that the productivity of employees can be improved and set in motion Malaysia’s aim to become a high income nation.

Before the implementation of minimum wage in 2011, it is found that 33.8% of private sector workers were paid below RM700 per month relative to the Poverty Line Wage (PGK) RM800, according to the Ministry of Human Resources in its National Employment Studies in 2009.

With the introduction of a national minimum wage according to the Malaysian Wages Order 2012, the lowest monthly rate for employees in Peninsula Malaysia is RM900 while in Sabah and Sarawak, the lowest monthly rate is RM800.

The Debate Over Minimum Wage In Malaysia

Although the minimum wage policy has been barely implemented for a couple of years, but calls to revise the minimum wage have resurfaced as the minimum wage is set for review every two years.

Malaysian Institute of Economic Research (MIER) executive director Dr Zakariah Abdul Rashid was quoted in a local news daily in January this year as stating that “based on the minimum wage policy, we need to do the review every two years.”

Taking the opportunity to get their viewpoint in ahead of time, in October last year, the Congress of Unions of Employees in the Public and Civil Services(Cuepacs) had publicly called for a revision of minimum wages of public servants to RM1,200 to help them cope with the rapidly spiralling cost of living.

The Malaysian Trades Union Congress (MTUC) also chipped in with their view that minimum wage to be raised to RM1,200 and standardised across the peninsula as well as Sabah and Sarawak, as reported by a local news daily in January this year.

Are employees justified in their demand which in this case comes to about a 30% increase? A recent World Bank study found that the percentage of wage increment in the country was flattening at 2.6% per year while productivity increased on average by 6.7% in the same period for the past ten years.

In light with the above, it is apparent that the salary increment is not in line with productivity gains and the cost of living and this clearly indicates there is distortion in the local labour market, where the increment of wages fails to complement with the rising cost of living.

Admittedly, Malaysia has moved ahead in comparison with many other neighbouring developing countries when it comes to a national minimum wage but we are still far behind some of our Asian neighbours such as Japan, Korea, and Singapore, among others.

Let’s take a quick look at the countries with the highest minimum wages:

Source: SaveMoney.my

Employers Seek A More Practical Implementation Approach

Despite the fact that employees in Malaysia started getting paid minimum wage beginning January last year, but its implementation remains a challenging endeavour for both the public and private sectors as some employers who run small or micro businesses are facing challenges to meet Minimum Wage Scheme as they are still not ready.

According to a news report by Bernama last Wednesday, some 587 out of the 42,297 companies inspected were found to have not complied with the minimum wage policy as of 31 January 2015.

Human Resource Minister Datuk Seri Richard Riot was quoted as saying that 1,201 claims associated with the minimum wage were received and 276 of the cases were resolved in the Labour Court while the remaining 925 cases were being attended to by the ministry officers.

The cases of companies reported to have not met the minimum wage policy are just the tip of the iceberg and there are various reasons that lead to the problem, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan (pic) told Malaysian Digest. Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan

“The poor financial capacity of some employers, especially those who run small and medium enterprises (SMEs) or micro-businesses is the main reason why they are not able to meet the RM900 minimum wage for their employees as their margin is small,” he noted.

“Despite the fact that most of the employers and employees are fully aware of the minimum-wage law, the problem still persists and this may due to some interlinked reasons,” he said, adding that employees who do not receive the minimum wage from their employers should lodge a complaint or seek better employment opportunities.

Shamsuddin said MEF had earlier suggested the National Wages Consultative Council come up with a more practical mechanism to facilitate the whole implementation as it is found that there are still many employers who failed to comply with the minimum wage policy.

“The minimum wage should be implemented in different levels depending on the area and the nature of the job. There must be a different rate between rural and urban areas given the fact that the cost of living in different geographical areas varies significantly,” he added.

After all, if employers are unable to absorb the cost of increasing minimum wage, they might be forced to consider job cuts or reducing work hours which impact negatively on employees’ wages and employment rates.

Of Social Justice, Workplace Productivity and Poverty Reduction

Fundamentally, the implementation of minimum wage in Malaysia is to overcome poverty and increase the productivity in the workplace as well as to provide social justice by bridging the income inequality.

In 1998, former US President Clinton stated that minimum wage will raise the living standards of 12 million hard working Americans. More recently, incumbent US president Barack Obama has also made the raising of minimum wage a centrepiece of his stance against income inequality so that people who work full time should not live in poverty.

The push and pull between employees and employers on minimum wage is a constant search for equilibrium as market forces are pitted against labour supply and competitiveness. Even in developed nations like the UK and US, calls are currently underway for increments in minimum wage from 6% in the UK to 30% in some states in the US.

Economic expert and lecturer of Universiti Sarawak Malaysia (UNIMAS) Prof Dr Shazali Abu Mansor When contacted by Malaysian Digest, economic expert and lecturer of Universiti Sarawak Malaysia (UNIMAS) Prof Dr Shazali Abu Mansor (pic) said although the implementation of minimum wage is a laudable move but the scheme needs to be reviewed so that the minimum wages implemented are realistic in different areas and states.

“It is clear that the readiness of smaller organizations is less compare to larger ones as smaller firms are less profitable. The government must set realistic minimum wage accordingly based on the nature of the job, sector, and area.

“For example, the RM900 minimum wage implemented in peninsula Malaysia is acceptable to remote areas but certainly not in the bigger cities. Therefore, employers in the rural areas should be allowed to pay less to their workers. This is because some employers of micro businesses are unwilling to absorb the cost of higher minimum wage when they are unable to will pass it onto consumers,” he said.

“In light of this stance, the implementation of minimum wage is important as it helps to increase workplace productivity, prevent labor exploitation and lower the poverty levels,” he concluded.

A More Comprehensive And Realistic Measure Needed

A local small and medium enterprise owner, Issac, 29, who runs a recycling centre in Lumut, Perak, shared his view with Malaysian Digest when contacted yesterday.

“Currently I have four employees in my workshop. They work six days in a week and get paid RM45 per day. For every overtime hour worked, they will be paid hourly wage plus the overtime premium” he said.

Asked whether the government should consider extending the minimum-wage policy, he said: “It all depends as I believe the financial capacity of the business entity itself tells everything. The larger the firm, the more the profits earned. If the firm is profitable, then I think they have no problem and can afford [the suggested minimum wage].”

“Every firm has different profit levels depending on determinants such as the nature of the organization, size, productivity, innovation and others,” he said, adding that a more realistic and reasonable minimum wage need to be introduced based on the different criterion of the business entity so that no party is hideously or deliberately exploited.

Malaysia is on the right track as we join some 150 countries around the world with minimum wage policies already in place as it shows the seriousness of the government to help both the employers and employees in facing the possible challenges of meeting the minimum wage. Nonetheless, having employers and employees to mutually agree on the minimum wage has been a challenging endeavour.

Employees will only view the issue from the perspective of equitable remuneration; on the other hand, the employer will focus on factors that can justify raising minimum wages, mainly productivity and business margins. In most cases of negotiations, it has been to ‘agree to disagree’ rather than reaching a consensus.

In MEF’s annual survey, the 20th edition for 2015 which was released in November 2014 included a segment on employees’ skills development “whereby it was revealed that 59.3% of the surveyed companies indicated that their newly recruited executives lack leadership skills, followed by job specific skills (58.2%) and English oral communication skills (55%).

For the newly recruited non-executives, 56.6% of the participating companies cited lacked technical skills, followed by English oral communication (53.0%) and job specific skills (53.0%).

The MEF study also revealed a slightly higher forecast in salary increments in 2015 with executive salary expected to rise by 5.89 per cent and 5.78 per cent for non-executives. This is due to the fact that some 49.5 per cent of the participating companies will take into account the implementation of Goods & Services Tax (GST) in forecasting the salary increase for 2015.

In order to ensure that the minimum wages rate is properly set, the government has to continue to play a pivotal role in finding a ‘win-win’ solution for both parties and it has to be emphasized in the best interests of all parties involved so that it is in line with the nation's aspiration towards a sustainable high income nation.