Minimum Wage Policy in Malaysia

Introduction

The Malaysian Government has implemented a minimum wage order of RM1100, applicable to both Peninsular Malaysia and Sabah & Sarawak. The main objective behind this policy, proposed by Bank Negara Malaysia, is to reduce income inequality among the population. Employees from lower-income groups mostly benefit from this implementation. The primary reason for introducing minimum wage laws is to prevent employers from exploiting desperate workers. The minimum wage should provide enough income to afford today's living costs.

Impact of Minimum Wage Implementation

There are numerous impacts from the implementation of the minimum wage. This initiative is also expected to help reduce racial and gender inequality. With this implementation, every group receives equitable income distribution. Middle-class households enjoy numerous benefits as their income is adjusted. The main impacts can be seen in EPF contributions from both employees and employers, consumer purchasing power, worker training to become skilled laborers, increased productivity, and a reduction in foreign workers in the industry.

EPF Contribution

An increase in salary means an increase in EPF contributions. Contributions come not only from employees' income but also from employers. At retirement age, employees will have sufficient savings in their EPF accounts. This will help employees plan their future after retirement, ensuring financial security.

Buying Power

Most of the lower-income group work to support their personal needs and take care of their families. An increase in household income can enable them to purchase basic necessities for their families, parents, and themselves. Children will grow up with sufficient income, good health, quality education, and savings for their future. An increase in income means decreased stress levels in children, improved family relationships, and stronger chances of upward mobility. Raising the minimum wage enhances the buying power of people, enabling workers to have a basic standard of living.

Skill Development

Employees working with low income often lack opportunities to develop skills. Many do not have the chance to improve their skills to secure better jobs. Changes in wage income encourage employers to provide training or send their workers for skill development to improve company management systems, enabling workers to enhance their productivity. This benefits not only the employees but also offers an advantage to companies by having skilled workers in the future.

Increased Productivity

Employees feel satisfied with the implementation of the minimum wage. An increase in their income can motivate them to work harder for the company. Efficiency can improve as it will help increase productivity and loyalty and incentivize employees to do their best for the company. Companies start to focus more on increasing labor productivity because they know they are paying more for labor. This can enhance the overall efficiency of the economy.

Reduction of Foreign Workers

Companies train local workers to become skilled laborers, reducing dependence on foreign staff in organizations. The implementation of a minimum wage can encourage company employees to focus more on their work and reduce absenteeism. Companies push local workers harder due to higher pay. This will improve their income when they apply for new jobs as skilled workers. Most companies prefer local skilled workers over foreign workers, as foreign workers in Malaysia often do not fall into the skilled worker category.

Conclusion

The minimum wage is expected to benefit all workers, providing a positive impact not only on their needs but also for their families. Importantly, workers can increase their productivity for their companies, contributing positively to the country's economic growth.

References

1. Bank Negara Malaysia. (n.d.). Minimum Wage Policy and Its Implications. Retrieved from [URL]
2. Economic Planning Unit. (n.d.). Impact of Minimum Wage on Malaysia's Economy. Retrieved from [URL]
3. Human Resources Development Fund. (n.d.). Skills Training and Development in Malaysia. Retrieved from [URL]
4. Ministry of Human Resources Malaysia. (n.d.). Reducing Income Inequality through Minimum Wage. Retrieved from [URL]
5. World Bank Group. (n.d.). Malaysia's Labor Market and Minimum Wage Effects. Retrieved from [URL]