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Wednesday May 2, 2012

Hard work, innovation needed to match minimum wage

WORKERS in Malaysia celebrate Labour Day knowing the minimum wage that will be paid to workers in the private sector – RM900 per month for employees in the peninsula and RM800 for those in Sabah, Sarawak and Labuan.

With some exceptions, this will kick in six months after the Mini­mum Wages Order is gazetted. Finally, Malaysia will have a minimum wage policy in place.

Minimum wages are part of the social protection system. They counter-balance some of the distortions in the labour market and help soften the blow felt by workers during an economic crisis.

Revealing details of the minimum wage on Monday, Prime Minister Datuk Seri Najib Tun Razak said it complements the National Trans­formation Policy that is meant to drive Malaysia towards becoming a high-income nation.

However, the minimum wage policy is not a guarantee of better things to come. It has to be matched with hard work, innovation and vigilance.

The announcement of the minimum wage rate and coverage should also be taken as the Government issuing challenges to various stakeholders.

It is comforting to have a wage floor but it is tempting to also use it as a crutch.

Labour productivity has to improve consistently across the board. Otherwise, there is the danger of the minimum wage becoming a double-edged sword that imposes a heavy burden on employers as well as on the economy.

Employers had, naturally, been lukewarm about Malaysia having a minimum wage policy. But it is pretty much a done deal now.

The implementation, as outlined by the Prime Minister, factors in some time and flexibility so as to make the transition less strenuous for the employers.

But the sooner the employers understand the overall benefits of minimum wages, the better. Malay­sia cannot be a developed nation if a significant portion of its workers have salaries that keep their household income below the poverty line.

A high-income economy does not rely on low-cost labour to fuel progress. Instead, it is propelled by ideas and value enhancement.

So, here is the challenge for business owners – they have to learn to plan and strategise better, and they have to fully appreciate that competitiveness is not only about being cheaper.

The National Wages Consultative Council has the huge challenge of ensuring that the minimum wage policy works well. The policy needs to be dynamic and responsive without being disruptive.

For example, the National Wages Consultative Council Act 2011 states that the council should review the minimum wage rate once every two years or on an ad hoc basis.

All eyes will be on the council every time inflation rears up. Many parties have a lot to do when the minimum wage is introduced.

The principle that should first and foremost guide them all is that minimum wages definitely do not mean minimum impact.

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