The History Of How It Was Calculated

Did you know that our industry-wide national minimum wage was actually introduced more recently than we expected?

The Malaysian government announced the nationwide implementation of the minimum wage in July 2012, and in the same year the 2012 Minimum Wage Decree came into being. The law was then applied on January 1, 2013. This was barely ten years ago.

At that time, the minimum wage rates for West Malays were RM 900 / month and RM 4.33 / hour, while for East Malays it was RM 800 / month and RM 3.85 / hour.

What was there before the minimum wage order?

Previously, Malaysia only had the Wage Boards Act 1947, which was established for vulnerable workers with low wages and inadequate collective agreements.

According to this law, the government can create wage councils for certain non-union sectors of the workforce, and they will be composed of representatives of government, workers and employers, and no more than three people.

These councils would discuss and submit wage settlement proposals that the government could choose to enact in a wage regulation ordinance.

Wage rates for unionized sectors of the workforce are then determined by collective agreement and set through decentralized collective bargaining, in accordance with the 1967 Industrial Relations Act.

As a result, 6 decrees on the payment of wages were adopted (and some were amended in the following years):

  • Catering and hotel
  • Cinema worker
  • Stevedores (a person employed at a wharf to load and unload vessels) and stevedores
  • Store assistants
  • Sellers (Sarawak)
  • Private security guards

To help you assess the minimum wage rate paid to workers at the time, movie workers had to be paid RM155 per month in theaters that normally show 4 movies a day, and salespeople aged 21 and over had to be paid. paid 250 RM per month in some urban areas. districts, according to the International Labor Organization.

Failure to pay the minimum wage rates established by wage regulation orders may result in the employer being ordered to pay the worker the remaining sum of what should have been paid and a potential fine of not more than $ 500. RM for each violation.

Our national productivity achievement has increased, but wages have not caught up

Now there have been several setbacks under the Wage Boards Act.

The process of establishing minimum wage orders was long, tedious and on-time, minimum wage rates were not regularly revised, and many other large workforces were left behind as only these 6 were established. In addition, the law also did not indicate how often minimum wage rates should be adjusted.

Additionally, in 2009, the Ministry of Human Resources conducted a national employment study and found that 33.8% of private sector workers were paid below RM 700 per month, compared to Pendapatan Garis Kemiskinan ( PGK) 800 RM, according to MMU’s Professor Siti Marshita, an expert in labor law, in her article here.

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

Realizing that Malaysians are not being paid fairly for their work as well as for the rising cost of living, the government then decided to introduce a national minimum wage from the creation of the National Wage Advisory Council in 2011.

From there, the council was tasked with studying anything related to the minimum wage, such as speaking with relevant stakeholders and learning from other countries to make recommendations to the government.

Once this was completed, the Minimum Wage Ordinance was finally announced and enforced the following year, setting an industry-wide national minimum wage rate for all Malaysians.

Not everyone was happy, although

To help you gauge the value of the first minimum wage rate, RM 900 back then in 2013 would mean RM 1,037.68 in current ringgit value, according to the Malaysian Inflation Calculator. So the difference is not too big, but not close to our current minimum wage rate of RM 1,200 as well.

Initially RM 1,200 per month was the amount requested by the Malaysian Trades Union Congress, but later revised its request to RM 900 to respond to the government halfway, according to the New York Times.

Although this was deemed sufficient for the time being by the government and the union at the time, the Socialist Party of Malaysia did not share the same sentiments.

They rallied in KL to demand 1,500 RM per month and criticized the government for its discriminatory nature by setting different rates for workers in different parts of the country.

However, then Prime Minister Najib Razak just replied that the different rates reflected regional variations in wages and the cost of living.

As for the employers, some of them were against paying the minimum wage because it would reduce companies’ profit margins and some companies with a small number of employees could be forced to close their doors.

A UM Economics speaker, Professor Terence Gomez, also said in the interview that introducing a national minimum wage could also hurt customers, if companies passed on the increased cost of exports to their customers.

“I see this more as a political initiative than an attempt to solve the problem of unfair wages for workers,” he said in the interview with the NY Times.

He also added that these wages could be more advantageous for workers in rural areas than for urban workers, and that “the rural vote is what puts the government in power.”

The national minimum wage rate did not stay at that amount, of course, as over the years it has been changed 3 more times to return to the RM1,200 it is today.

2013201620182020
West MalaysiaRM900 / month, RM4.33 / hourRM1,000 / month, RM4.81 / hourRM1,100 / month, RM5.29 / hourRM1,200 / month, RM5.77 / hour
(the surcharge only applies to workers in city council or city council areas)
East MalaysiaRM800 / month, RM3.85 / hourRM920 / month, RM4.42 / hour

Our minimum wage is going up, but is it benefiting everyone equally?

Although a national sector-wide minimum wage has alleviated wage inequalities across the country, we are still fairly unfairly compensated for our productivity in most sectors of the workforce, according to the 2018 annual report. of Bank Negara Malaysia.

Malaysians are underpaid in most sectors of the workforce / Image credit: Bank Negara Malaysia

Although there has been a tilt of higher education graduates in the market, the actual minimum monthly base salary for new graduates has declined.

However, the starting salary of non-tertiary education graduates has increased, thanks to increases in the national minimum wage.

According to the BNM, this could suggest that our economy has not created enough high-skilled jobs to absorb the number of graduates entering the labor market, resulting in 50% overqualification of those in low-skilled manual jobs. for these professions, as Khazanah found. Research Institute.

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The next time you hear someone criticize Millennials or Gen Z adults for being “picky” with jobs, you’ll be better informed as to why.

While it is a good thing that our national minimum wage increases and benefits those who need it most (as it should), it is still important that a similar protection policy is put in place before the issue of the brain drain does not become detrimental to the economic growth of the country. .

  • You can read more salary articles we’ve covered here.

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Jothi Venkat

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