Minimum wage enforcement supposed to address inefficiencies in labour market
SHAH ALAM - The implementation of the minimum wage is supposed to address inefficiencies in the labour market.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the implementation was like a stopgap measure as the labour market was unable to determine the right level of wage for a given number of labour.
“In that sense, there must be other policies and measures to ensure that the labour market is able to price the right kind of wages and salaries.
“Certainly education is key as this will determine the level of skill possessed by the workers and ideally, the higher the skill set, the higher the wage level.
“The other is the demand for labour,” he said when contacted.
Afzanizam added that it showed how businesses employ their workers were closely associated with their business model.
He said the government’s role was to ensure a conducive ecosystem for businesses to grow which may include hiring the best and skilled talents.
This, he said included regulatory environment, taxation, infrastructure, access to credit, supply chain and the availability of talent pool.
“In a way, the business environment has to be conducive enough for them to employ more workers and those with better skillsets and pay at the right price (wage).
“If you think that way, the determination of salary and wages can be quite delicate,” he said.
He said it was never a one-way direction in creating a competitive environment.
“If the determination of wages is done unilaterally, it might impact our competitiveness level.
“The government's role is to be the balancing act to ensure the market is efficient and effective.
“It covers both sides of the supply (workers) and the demand (businesses),” he said.
Meanwhile, University of Science and Technology Provost for Research and Innovation Professor Geoffrey Williams said most studies conducted around the world found that implemention of minimum wages have benefits.
He said it was proven to be beneficial in Malaysian since it was introduced in January 2013.
“The current rise in the minimum wage for micro-enterprises will affect around 78 per cent of all businesses and might benefit almost two million people.
“Increasing the minimum wage raises the income of people on low-paid jobs who tend to spend almost all of it and also spend it in local communities,” he said.
Williams added that the extra spending could be RM6.5 billion per year which would benefit many small, local businesses and communities.
He said it will particularly help young workers who tend to earn low salaries at the start of their working life and this would be a huge benefit to young people.
“The minimum wage helps the economy by raising income and spending for low-income groups as it reduces the need for welfare support for these groups.
“It also encourages companies to improve their business models to afford the wages and to stop relying on low-paid jobs or foreign workers and often they adopt technology to improve their business which is a better option.
“The higher spending and changes in business models help to support economic growth and development and attract investment in higher value-added businesses,” he said.
He added that finally implementing the rise in the minimum wage to RM1,500 for micro-enterprises was long overdue.
"This change was made in March 2022 but has been delayed for micro-enterprises and so they have had 15 months to adjust.
“It is a very small change for companies of only RM1.70 per hour for each employee, so it should not affect them very much but will benefit their employees a lot.
“Most small and medium-sized enterprises (SME) already pay more than RM1,500 anyway and the SME Association of Malaysia estimates that 90 per cent in Kuala Lumpur pay at least RM2,300.
“Any SMEs that cannot afford this must adjust their business model or consider closing down and use their resources more effectively,” he said.
The enforcement of the minimum wage of RM1,500 will be implemented from today.
