At construction sites, plantations and factories, millions of low-income workers across Malaysia are set to receive a pay raise. Washington DC Labor and Employment Lawyers say that this is a huge step and improvement for the country.
About 3.2 million such workers are expected to benefit from the newly announced introduction of the country’s first minimum wage, part of the government’s plan to transform Malaysia into a high-income nation.
But reactions to the government’s decision to introduce a minimum wage varied Tuesday, with one economist dismissing the move as an election gimmick designed to appeal to workers before voting that many expect could be held as early as next month.
The minimum wage will be set at 900 ringgit per month, or $297, for workers on the Malaysian Peninsula, and 800 ringgit for those in the states of Sabah and Sarawak, on the island of Borneo, Prime Minister Najib Razak said late Monday, in announcing the details of the new legislation.
The lowest-paid will now be guaranteed an income that lifts them out of poverty and helps ensure that they can meet the rising cost of living.
The number of countries and territories in the Asia-Pacific region that have some form of minimum wage has grown in recent years, and now includes Cambodia, Hong Kong, Indonesia, Thailand and Vietnam. In some places, the minimum wage covers all workers, while other places have set minimum wages for specific regions or industries.
The Malaysian government is seeking to transform the country into a high-income nation by 2020, which would require the average annual income to rise to the equivalent of $15,000. Last month the per capita income had increased to $9,700 a year, up from $6,700 two years ago.
Most companies will be required to begin paying the minimum wage in six months, although companies with five workers or fewer will be given 12 months to comply.
Foreign workers will be entitled to the minimum wage, but it will not cover workers in the domestic sector, like maids and gardeners.
The union had been calling for a minimum wage for more than a decade. While the union initially asked for the minimum wage to be set at 1,200 ringgit a month, he said it had later revised its demand to 900 ringgit in an attempt to reach a compromise with the government and employers.
However, the opposition Socialist Party of Malaysia had called for a minimum wage of 1,500 ringgit a month. The party, which held a rally in Kuala Lumpur on Tuesday, criticized the government for not introducing the new rates immediately and said in a statement that it was discriminatory that there would be different rates for workers in different parts of the country.
The prime minister has said that the different rates were a reflection of regional variations in salaries and cost of living, according to news reports.
Employer groups say that paying the minimum wage would reduce companies’ profit margins and that some companies with five or fewer employees could be forced out of business.
It’s a big challenge is because the new rates are not really premised on increases in productivity or performance. This is a cost factor that has to be borne by employers, which eventually will affect their competitiveness.
Some companies might have to increase wages by as much as 100 percent. For instance, he said, some plantation workers in Sabah are currently paid about 400 ringgit a month, but that would increase to 800 ringgit under the new wage structure.
A professor in the economics faculty at the University of Malaya, said the introduction of a minimum wage could increase the cost of exports if companies passed the extra cost onto their customers.
The 900-ringgit monthly wage would be more significant for workers in rural areas than those in urban centers like Kuala Lumpur, where the cost of living has risen steeply in recent years. He added that in Malaysia, the rural vote is what puts the government in power.
There has been much speculation that a national election could be held in June, although the government has until April 2013 to hold the vote.
It was recently announced that civil servants would receive a pay raise and gave families earning less than 3,000 ringgit a month a one-time payment of 500 ringgit, a move expected to benefit four million households.
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