PETALING JAYA: Wages in Malaysia have stagnated over the past decade due to a series of structural problems which include increased competition from globalisation, as well as the education system struggling to meet evolving demands, say economists.
However, they said now is a good time for reforms as industries are moving towards Industrial Revolution 4.0.
Tunku Abdul Rahman University of Management and Technology’s Centre for Business and Policy Research chairman Dr Foo Lee Peng said one of the factors contributing to wage stagnation was globalisation that had intensified competition from neighbouring countries, pressuring employers to keep costs low and limiting wage growth.
“Technological advances and automation have further exacerbated the problem by reducing demand for certain types of labour and exerting downward pressure on wages.
“Our education system also struggles to meet the evolving demands of the economy, resulting in a significant skills gap,” she said.
Foo said the surplus of low-skilled workers and scarcity of highly-skilled individuals also contributed to wage stagnation across industries.
“Labour market policies have inadvertently hindered wage growth by failing to foster higher-paying industries,” she added.
On March 4, EPF chief executive officer Datuk Seri Amir Hamzah Azizan said about 81% of active members in the formal sector are earning a monthly salary of RM5,000 or less and out of this, 44% earn less than RM2,000, which is “too low”.
Foo said specifically, wage stagnation was attributed to several factors.
“This includes a low productivity growth, particularly in the manufacturing sector, limiting businesses’ ability to raise wages and over-reliance on low-skilled industries.
“Labour laws and regulations may not empower workers to negotiate higher wages and the high prevalence of informal employment hampers collective bargaining.
“The significant immigrant population in Malaysia also increases the labour supply and exerts downward pressure on wages,” she said.
University of Science and Technology Research and Innovation provost Prof Geoffrey Williams said Malaysian wages had stagnated due to an ineffective labour market.
“Bad employers complain and fight any reform that raises wages.
“They often make unsubstantiated claims that wage increases will cause job losses and company closures. These are wrong and very damaging,” he said.
With 10 million people unemployed or underemployed, and two million legal and possibly twice as many illegal foreign workers, Williams said employers often have a “take it or leave it” attitude.
“There are too few trade unions to push for wage-raising collective agreements. People negotiate wages alone.
“Structural issues also caused stagnant wages,” he said.
“Contracts don’t index wages to inflation as employers decide on increments and bonuses and sometimes, they don’t increase wages at all.
“The minimum wage should increase annually with inflation or average wages, not bureaucratically. Thus, low-wage jobs pay less,” he added.
Williams also said wages are often not linked to productivity, so employers keep any business performance or profit gains.
He said to fix stagnant wages, it was necessary to enforce labour rights and the rule of law in the labour market.
“We need stronger unions, enforcement of minimum wages, insisting on pay for young lawyers and interns and for adept employees to simply refuse low pay,” he said.
Weighing in, Universiti Tun Abdul Razak economist Prof Emeritus Dr Barjoyai Bardai said there is no clear answer to resolving the issue.
“It should be done the natural way to increase productivity first. When it does, the employers will then see that the workers deserve higher pay,” he said.
Agreeing that employees deserve a higher minimum wage, Prof Barjoyai said Malaysian workers are relatively underpaid compared to China, South Korea, Japan, the Philippines, Thailand, India and Indonesia.
“A study shows employers only share 35% of their business net income, compared with up to 60% in Europe.
“Now is the opportune time to restructure the labour market as we are in the process of migrating to IR4.0.
“The drastic application of artificial intelligence may see more graduates unemployed,” he said, adding the issue of productivity and wage must be looked at together.
National Association of Human Resources Malaysia president Zarina Ismail said wages should rise in tandem with increasing workers’ skills and more high-skilled jobs should be created through high-value investment.
“The wage-living cost gap has been around for a long time and has no single solution,” she said, adding that the issue should be taken seriously.
