Minimum wage in Malaysia for international students
The Wage Advisory council Act of 1947, which would have been applied to many industries, created the idea of subsistence wages in Malaysia. The Federal Wages Advisory Board Legislation of 2011 disbanded it and created the committee to provide suggestions and advice on minimum wage levels. East Malaysia received a minimum wage of RM800, while Peninsular Malaysia received a minimum wage of RM900 in 2013. It was then increased to RM 1000 for Peninsular and RM 920 for East Malaysia. Whenever the monthly minimum wage was increased to RM1,100 in 2019, the two distinct levels in East and West Malaysia became eliminated. In 2020 but now, the amount was lifted once more to RM1,200.
Companies will need to lower operational costs, including labour costs if they cannot recoup or maintain their enterprises. Businesses may impose salary reductions or perhaps even redundancies in addition to freezing promotions, incentives, and hiring. Organizations may use contract workers rather than recruiting staff members to cut expenses. In other words, the unemployment rate may rise based on how well companies can manage the present economic climate and price increases.
As per basic accounting, a rise in the minimum wage should be accompanied by an enhancement in productivity, leading to a rise in earnings. If not, this should increase the cost of production and create inflation to skyrocket. According to Malaysia’s Bureau of Statistics, worker productivity only grew by 1.7%. When focusing on the pertinent industries, only the services and manufacturing sectors showed growth of 6.8% and 0.5%, correspondingly. Buildings had a decline of 8.3%, 4.6%, and 3.4% in the mining, quarrying, and Agricultural industries, respectively. Expenses of commodities will ultimately increase, leading to greater costs of living when productivity growth cannot keep pace with the increase in minimum wages.
The life satisfaction of employees may neither thus be improved nor may their buying power be increased by greater salaries. Compared to our bordering countries, Malaysia’s competitiveness may suffer due to the rise in the minimum wage. Because their minimal salaries are less than Malaysia’s by around 43.99%, 41.14%, 43.21%, 11.63%, 36.98%, 69.63%, and 90.22%, correspondingly, international investors could be more drawn to nations like Vietnamese, Thai, Cambodian, Indonesian, Philippine, Laos, and Burmese. Less restrictive wage levels would result in fewer operational expenses and, consequently, larger profitability. Elon Musk, the king of electric vehicles, considering investing in Indonesia is not surprising. The redirection of international investment would further hamper the GDP of Malaysia’s recovery.
Even though boosting the minimum wage is a worthy goal, it may not be the most effective strategy at this period, especially because most firms are still recouping from the damages brought by the Covid-19 outbreak. Boosting the minimum wage now might be detrimental instead of beneficial, considering the global wage inflation brought on by the Russia-Ukraine conflict and their falling currencies.
