KRI: Minimum wage should frequently increase

Malaysia’s minimum wages are about 45% to 49% of the median wages, lower than the cited global average of 55%


THE minimum wage in Malaysia should increase frequently, either with inflation or the median wage level, according to Khazanah Research Institute (KRI).

In KRI’s latest publication, “Starting Point Matters: Low Wages in the Job Market”, researcher Siti Aiysyah Tumin said strengthening wage policies is essential to ensure the wellbeing of all workers.

She said minimum wage was only introduced in 2013 and Malaysia has a long way to go to ensure that all workers are paid at least RM1,200-RM1,500.

In a recent review on global minimum wages, the International Labour Organisation reported the minimum wage is around 55% of the median wages in developed countries and 67% of the median wages in developing and emerging countries, on average.

At RM1,100 and RM1,200, Malaysia’s minimum wages are only about 45% to 49% of the median wages, lower than the cited global average.

“We could consider revising our minimum wage to a higher level. If we set our minimum wage to 55% of the median wage, taking developed countries as the benchmark, it is around RM1,343.

“While the minimum wage is meant to protect the most vulnerable and low-paid workers, the average and median wages must also be pushed higher,” Siti Aiysyah said in the report.

She noted that linking productivity to income is one of the ways to boost wages, but low take-up rates of the productivity-linked wage system by employers warrants more scrutiny.

She said wage levels should also aim to be living wages, which pay workers such that they can afford to live a dignified life.

“The government plays an important role to direct this recovery, while decent work with equitable pay and inclusion in social protection schemes, among others, has to be the priority of the various growth-enhancing initiatives introduced by the government,” she said.

The Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin said fresh graduates recorded a decrease in monthly income where the majority of them earned between RM1,001 and RM1,500 last year compared to RM2,001 and RM2,500 in 2019.

KRI stressed that the figure was shocking, considering since February 2020, the minimum wages for an employee are RM1,200 in selected cities and municipal council areas, and RM1,100 elsewhere.

The think tank also said low wages among graduates are a long-standing labour market issue that predates Covid-19.

A 2018 study on “Youth Transitioning from School To Work” by KRI found that the average reservation wage for young workers was RM1,555 with their actual wage being RM1,846.

Their expectation is reasonable, given the current minimum wages, allowance of graduate apprenticeship programmes (RM2,000 for then Skim Latihan 1Malaysia, now Protégé) and estimates of living cost for a single person in the Klang Valley (between RM2,490 and RM2,700).

The same study also reported wage offers by employers were between RM1,270 and RM2,066 for technical and vocational education and training graduates and from RM1,703 to RM2,682 for graduates with a Bachelor’s degree.

“While one might suggest graduates to invest further in higher postgraduate qualifications for better employment outcomes, employers do not offer substantially higher wages for new hires with this academic background,” it added.