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Did you know that our national minimum wage across the sector was actually introduced recently than we expected?

The Malaysian government announced the national application of minimum wages in July 2012, and in the same year Minimum Wage Order 2012 originated. The law was then enacted on January 1, 2013. That was barely a decade ago.

At that time, the minimum wage rates for western Malaysians were 900 RM / month and 4.33 RM / hour, while for Eastern Malaysia they were 800 RM / month and 3.85 RM / hour.

What was before the minimum wage order?

Before that, Malaysia had only Wage Councils Act 1947 which was established for workers who were sensitive to low wages and who had inadequate collective bargaining.

Under this Act, the government may establish Wage Councils for certain non-union sectors of the labor force, and they will be composed of the government, representatives of workers and employers, and not more than three individuals.

These councils would discuss and submit proposals for regulations on salaries that the government could decide to make in the Wage Regulation Order.

Wage rates in labor sector unions are then determined by collective agreement and determined by decentralized collective bargaining, according to Industrial Relations Act 1967.

Therefore, 6 orders on wage regulations were issued (and some were amended years later):

  • Catering and hotel
  • Cinema
  • Stevedores (a person employed at the port for loading and unloading ships) and cargo handlers
  • Sellers
  • Sellers (Sarawak)
  • Private security guards

To help you measure the minimum wage rate then paid to workers, cinema workers had to be paid 155 RM a month in cinemas that usually screened 4 movies a day, and salespeople aged 21 and over in certain county towns, according International Labor Organization.

Failure to pay the minimum wage rates set by the Wage Regulation Orders may result in the employer paying the worker the remaining amount of what should have been paid and a potential fine of no more than RM 500 for each offense.

Realizing that our national productivity has increased, but wages have not arrived

There were several of them now delays under the Wage Councils Act.

The process of establishing minimum wage orders has been long, arduous and ad hoc, minimum wage rates have not been regularly revised, and many other large workforces have been left out because only these 6 have been established. did not state how often minimum wage rates need to be adjusted.

Moreover, in 2009, the Ministry of Human Resources conducted National Employment Studies and found that 33.8% of private sector workers received a salary below RM 700 per month, compared to Pendapatan Garis Kemiskinan (PGK) RM800, according to Prof. Siti marshita from MMU, an expert in labor law, in his work here.

In addition, the World Bank found that in the last 10 years, wages in Malaysia were only 2.6% per year, while productivity increased by an average of 6.7% over the same period.

Realizing that Malaysians were not paid fairly for their work plus increased living costs, the government then decided to introduce a national minimum wage starting from the establishment National Wage Consultative Council in 2011

Since then, the council has been responsible for studying all matters related to minimum wages, such as talking to relevant stakeholders and learning from other countries to make recommendations to the government.

When that was done, the Minimum Wage Order was finally published and implemented a year later, setting a national minimum wage rate for all Malaysians in the entire sector.

Not everyone was happy

To help you measure the value of the first minimum wage rate, the then RM900 in 2013 would mean RM 1,037.68 in today’s ringgit value, according to Malaysian inflation calculator. So not too big a difference, but not even close to our current minimum wage rate of 1200 RM.

It was initially RM 1,200 per month in the amount requested by the Malaysian Crafts Federation Congress, but later revised their request for RM900 to meet the government halfway, according to New York Times.

Although the government and the union considered it sufficient at the time, the Socialist Party of Malaysia did not share the same feelings.

They gathered in KL asking for 1,500 RM per month and criticized the government for discriminating in setting different rates for workers in different parts of the country.

However, then-Prime Minister Najib Razak only responded that the different rates were a reflection of regional variations in wages and living costs.

As for employers, some of them were against the payment of the minimum wage because it would reduce the profit margin of companies, and that some companies with a small amount of employees could be forced to leave the job.

A lecturer in UM economics, Professor Terence Gomez, also shared in an interview that the introduction of a national minimum wage could also harm customers if companies increased the cost of exports to their customers.

“I see this more as a political move than as an attempt to address the problem of unfair wages of workers,” he shared in an interview with NY Times.

He also added that these wages may be more beneficial for workers in rural rather than urban areas, and “the rural voice is what puts the government in power.”

The national minimum wage rate has not remained at this amount, of course, as it has changed 3 more times over the years to reach the 1200 RM it is today.

2013 2016 2018 2020
West Malaysia RM900 / month, RM4.33 / h 1,000 RM / month, RM4.81 / h 1,100 RM / month, RM5.29 / h 1,200 RM / month, RM5.77 / h
(The increase applies only to employees of the city council or the area of ​​the municipal council)
East Malaysia RM800 / month, RM3.85 / h RM920 / month, RM4.42 / h

Our minimum wage is rising, but does it benefit everyone equally?

Although the national minimum wage across the sector has alleviated wage inequality in the country, we are still fairly unfairly compensated for our productivity in most labor sectors, according to Malaysian National Bankannual report for 2018.

Malaysians are underpaid in most sectors of the workforce / Image Credit: Malaysian National Bank

Although there has been a downturn in the tertiary education market, the realistic minimum monthly basic salary for new students has fallen.

However, the starting wage for those without tertiary education has skyrocketed, thanks to a national increase in the minimum wage.

According to BNM, this could suggest that our economy has not created enough highly skilled jobs to absorb the number of graduates entering the workforce, resulting in 50% of those in low-skilled manual jobs being retrained for these occupations, as he found Khazanah Research Institute.

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The next time you hear someone criticize millennials or Generation Z adults for being “picky” in business, you’ll be better informed about why.

While it is a good thing that our national minimum wage is increasing and benefiting those who need it most (as it should), it is still important to establish a similar protective policy before the issue of brain drain becomes detrimental to a country’s economic growth.

  • You can read more articles about the salaries we processed here.


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