30-11-2023 (KUALA LUMPUR) In a significant move towards addressing the longstanding issue of low wages among Malaysian workers, Economy Minister Rafizi Ramli announced on Thursday (Nov 30) the launch of a pioneering “progressive wage” programme set to kick off in June next year. This initiative aims to elevate the earnings of low-income workers as they acquire new skills, with government subsidies playing a pivotal role in supporting salary increments.
The voluntary programme is slated to begin its trial phase with 1,000 companies, primarily focusing on micro, small, and medium enterprises. Minister Rafizi Ramli, while presenting the White Paper on the Progressive Wage Policy in Parliament, disclosed that only Malaysian employees earning less than RM5,000 (US$1,076) per month would be eligible to participate. Notably, workers from multinational corporations and government-linked companies are exempted from this initial phase.
Explaining the essence of the progressive wage policy model, Mr. Rafizi affirmed, “This model involves a gradual increase in wages, aligning with the rise in employee productivity. It not only enhances the skills of employees but also benefits employers through heightened productivity, enhanced employee loyalty, and increased competitiveness.”
Highlighting the prevalent issue of low wages in Malaysia, Minister Rafizi pointed out that a staggering 73.3 percent of the formal workforce, comprising 6.54 million individuals, earned less than RM5,000 per month. Citing official data, he stated that wages had grown at an average rate of 4.1 percent from 2011 to 2022.
To incentivize companies to participate in the programme, the government plans to provide financial support. Participating companies stand to receive cash incentives of up to RM200 monthly for 12 months for fresh graduates and entry-level positions. For non-entry-level positions, the proposed incentive rate is up to RM300 monthly for a similar duration. These incentives will be subject to annual reviews based on the government’s fiscal position.
The disbursement of incentives will be contingent upon employers submitting documents verifying their staff’s participation in skills upgrading courses within government-certified training programs.
Malaysia’s progressive wage model draws inspiration from Singapore’s Progressive Wage Model, implemented in specified sectors, where workers experience a multi-year salary increment schedule in tandem with skills acquisition.
However, the Malaysian government’s recent strides in this direction have sparked public discussions regarding the feasibility of a progressive wage model in the country and its potential implications for the existing minimum wage policy covering all sectors. Currently, Malaysia maintains a minimum monthly wage of RM1,500, implemented in May of the preceding year. According to the National Wages Consultative Council Act 2011, this minimum wage must undergo a review every two years.
Minister Rafizi emphasized the government’s decision to initiate a pilot programme to fine-tune the system before extending it to all employers in the future. “An impact assessment will be made on the effectiveness of the pilot project and its viability before it is fully implemented,” he asserted.
The incentives provided to companies will be subject to specific conditions and criteria for a one-year period, allowing companies the necessary time to adjust their business plans accordingly. A survey involving 2,038 workers revealed that 60 percent of them supported the implementation of the policy.
Minister Rafizi projected that the estimated RM2 billion allocated for the programme would benefit 1.05 million workers, leading to an increase in gross domestic product by RM3.3 billion. He further stated that contributions to the Employees Provident Fund (EPF), Malaysia’s retirement savings fund, would increase by RM790 million, while tax revenue would see a boost of RM1.8 billion from an additional 37,529 new taxpayers a year after the programme’s implementation.
In a parliamentary debate on the White Paper, various parliamentarians raised questions about the implementation of the policy. Temerloh MP Salamiah Nor expressed concern about potential employer misuse of incentives and suggested direct disbursement to employees to prevent manipulation.
Ipoh Barat MP M. Kulasegaran questioned the eligibility criteria, particularly for workers in full service or with employment contracts of more than three years, arguing that certain workers, particularly those in short-term contracts, might miss out on the benefits.
Kubang Pasu MP Ku Ismail Ku Rahman, while expressing support for the policy, emphasized the importance of its proper implementation for long-term sustainability, voicing concerns about potential complications if there were changes in government.
