Minimum wage will protect workers and help achieve the New Economic Model’s goals. And, the Government is bent on ensuring this happens soon.

THE New Economic Model (NEM) unveiled by our Prime Minister on March 30, 2010 is a compre­hensive plan which is anti­ci­pated to more than double the per capita income in Malaysia from RM23,100 to RM49,500 by the year 2020.

In a nutshell, this programme aims to shift affirmative action from be­ing ethnically-based to need-based hence becoming more competitive, market and investor friendly.

The salient keys to the plan are high income, sustainability and inclusiveness, in which the goal is to stimulate economic growth by improving workers’ produc­ti­vity across all sectors of society.

The NEM seeks to empower the private sector and reduce fiscal disparity between the wealthiest and poorest of Malaysians.

Wage and employment are two things that cannot be separated.

According to a study by the Inter­national Labour Organisation (ILO) in 2008, almost half of the workforce worldwide works for a wage.

The standards of living and the well-being of the workers and their dependents are determined by the wage level, when and how they are attuned and paid.

Wages also play a big role in the economic performance of the country.

A general trend is that wages have grown at a substantially slower pace than GDP per capita.

There is evidence that the Malay­sian labour market has not been fully competitive.

According to the World Bank Study, wages growth in Malaysia recorded an average increase of 2.6% annu­ally for the past 10 years while the cost of living has outpaced the wages growth.

Real labour productivity grew by 6.7% annually for the same period.

The disparity, among others, is due to the imbalance in the employer-employee bargaining power where the employer seems to have an advantage in determining wages and there are employees who are, to a certain extent, getting extremely low wages.

This has resulted in exploitation of wor­kers and the wage level to be suppressed.

The National Employment Return Study conducted by the Human Resources Ministry in 2009, involving a sample of 24,000 employers and 1.3 million workers, found that 33.8% of the workers were paid below RM700 per month.

This shows that there is a distortion in the labour market where wages determined by market forces have thwarted the wages growth, while the cost of living has increased many folds.

This has surely brought negative impact to the worker’s community.

The inefficiencies and ineffectiveness of the existing wage determination mechanisms prompted the Government to enact the National Wages Consultative Council Act 2011.

Through the provisions of the Act, the National Wages Consultative Council was established with the responsibility to conduct studies on all matters concerning minimum wages and to make wage rate recom­mendation to the Government for final consideration.

The minimum wage policy is targeted to reach out to the working poor with the objective of ensuring basic needs of workers and their families are met, providing sufficient social protection to workers, compelling industry to move up the value chain by investing in higher technology and increase labour productivity and reducing the nation’s dependence on unskilled foreign labour.

Notwithstanding the noble objective of minimum wage that our Government has committed to achieve, the minimum wage rate that will be produced need to be carefully and meticulously deliberated and refined, so that it would not bring negative consequences to our labour market and economy.

The negative consequences ran­­ge from higher unemployment rate, busi­ness shutdown especially to the mic­ro enterprise, decrease inflow of fo­reign direct investment and large reduc­tions of formal employment.

The National Wages Consul­tative Council is tasked to deliberate on minimum wage, ensuring the policy will achieve its objectives and finally to put up their justifiable recommendation to the Government.

In the long run, a well-implemented minimum wage policy will serve as the catalyst in up­gra­­d­ing the skills of our workforce, enhan­cing the social protection of workers, pro­­mo­ting firms to uptake automation and eventually improving the efficiency and productivity in the labour market.

In this regard, the Government is very committed to make this happen and is targeted to announce the minimum wage rates by the end of this year.

> Datuk Seri Zainal Rahim Seman is the Human Resources Ministry secretary-general and he welcomes com­­me­nts and suggestions to his email.

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