The professionals & cons of Malaysia’s RM1,500 minimal wage for workers & companies

TLDR: Full video explainer accessible under!

As of Might 1, 2022, the minimal wage in Malaysia is RM1,500, a rise from the earlier RM1,200, which was the usual since February 1, 2020. This modification applies to government-linked corporations and personal sector corporations with a minimal of 5 staff. 

Since it could be difficult for micro, small, and medium-sized enterprises (MSMEs) to right away adhere to the brand new minimal wage, they are going to be given further time earlier than having to adjust to it.

In accordance with Datuk Seri M. Saravanan, the Minister of Human Sources, the exemption for MSMEs will final for about two years. 

Whereas the 25% bounce is unquestionably trigger for celebration, how does the increment actually have an effect on the native workforce, employers, and the economic system? Listed below are some execs and cons of the RM1,500 minimal wage. 

Professionals

1. Higher high quality of life

Based mostly on authorities knowledge launched in January 2022, the native shopper value index (CPI) rose 3.2% in December 2021 in comparison with 2020, as a consequence of an elevated value of meals and gasoline. 

Given these hikes, the rise within the minimal wage would supply a extra balanced earnings for Malaysians. 

2. Higher financial development 

The elevated minimal wage means workers will be capable of sustain with the requirements of residing, since they’ll have extra spending energy.

This could then result in larger consumption, which in flip results in financial development. 

Cons

1. Increased costs of products and companies

Not all employers would be capable of meet that customary and pay a further RM300 each month to every underpaid worker. In fact, there’s nonetheless a while earlier than companies should up their wages as per the brand new minimal wage, however it might nonetheless be a problem. 

Employers may additionally have to supply increments to present workers who might already be incomes above the minimal wage as these workers might anticipate a lift in remuneration as a consequence of seniority and expertise. 

Finally, this may result in larger costs of products and companies to make up for the revenue margin. 

2. Corporations might downsize

If corporations are unable to maintain up with the elevated wages, they might find yourself having to downsize and cut back labour prices.

That is worrying as it could contribute to the unemployment charge in Malaysia, which nonetheless hasn’t gone again to the pre-pandemic determine, which was 3.3% in 2019.

3. The bounce may worsen the economic system 

The Malaysian Employers Federation (MEF) mentioned that the RM1,500 minimal wage would solely profit overseas staff. 

The argument is predicated on the idea that the employees would find yourself sending extra money again residence as an alternative of spending the earnings in Malaysia. 

The way forward for Malaysia’s minimal wage 

Some expressed confusion over the brand new nationwide minimal wage as a result of the previous minimal wage had stipulated a two-tiered method.

Whereas city districts fell below the minimal wage of RM1,200, rural districts got a minimal wage of RM1,100. 

Having a better and standardised minimal wage of RM1,500 now can be helpful, particularly in a time the place the value of products and companies appears to all the time be rising.

However, it’s nonetheless essential to contemplate how the rise will affect the economic system within the larger image. 

Watch our video the place we go extra in-depth on the professionals and cons of the RM1,500 minimal wage right here: 

  • Learn different salary-related articles we’ve written right here.

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