Minimum Wages in Malaysia

Minimum wages was recommended by the National Wage Consultative Council (NWCC), the government has set a minimum wage of RM900/month for Peninsular Malaysia and RM800/month for Sabah, Sarawak and Labuan. This will benefit 3.2m private sector workers (25.8% of total employment) other than those in domestic services. The minimum wage will take effect six months from the date of the Minimum Wages Order is gazetted. Small firms with no more than five workers will be allowed to defer it for a further six months. There are several points that can be classifies as the objectives of the minimum wages.

Arguably, the higher wage will have a net positive impact on the economy as any potential small loss of jobs will be more than covered by its multiplier effect as it puts more money in the hands of workers, thereby releasing confined consumption, although with some inflationary impact. There is strong empirical evidence that countries which implement a minimum wage tend to see a positive wage effect and a small negative employment effect among workers covered by the minimum wage legislation (www.etp.pemandu.gov.my., July 21, 2012).

Besides that, the minimum wages also introduced to reduce nation’s dependence on unskilled or cheap foreign labour (www.themalaysianinsider.com, July 21, 2012). Many industrial sectors are likely to hire the foreign workers. This is because they can pay this foreign worker with a very minimum salary. Due to that, many our local people cannot find a job and its lead to unemployment rate to increase. With the minimum wages, it opens a job opportunity to Malaysian people to find a job. Thus Malaysia does not have to depend anymore to the foreign workers to do a job. The example of jobs that using the foreign workers are, in the construction sector and in the industrial sector.

Next objective of minimum wages are to helping workers. There are arguments for and