Minimum wage


Minimum wage

Minimum wage

Tuesday, March 6, 2012
  • Minimum wage
The perfect balance appears elusive but not impossible

Point of fact – most other countries minimum wage policies cluster around 40% of the average national wage, which should put Malaysia’s at around RM800. But that’s too low relative to the poverty line (it’s barely RM50 apart). On the other hand, putting it much higher would be increasingly disruptive economically.


So perhaps a graduated approach might be best – RM800 this year, then whack it up RM50 every year for the next 4 years or so. That won’t make anybody happy, but it gives an opportunity for every side to adjust (and save face).


Now as to the effects – if the minimum wage comes in at around the RM800 level, I wouldn’t expect too much of a negative impact, at least not immediately.


But there will be a cascading effect on wages up the scale, which will raise both supply side and demand side inflation over time – if  a basic worker gets an effective 25% increase in base pay, you think his/her supervisor ought to be getting anything less? And that will raise wage costs, particularly in those industries which are sensitive to worker pay, i.e. services. So your teh tarik and roti canai are going to get a bit more expensive pretty soon. 



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