Higher wages are better for everyone

  • Letters
  • Friday, 18 Oct 2019

WHILE employers question the minimum wage rate increase to RM1,200, workers say an extra RM100 is not enough. It seems to me that whenever there is a change in minimum wage, there is often minimum satisfaction all around. This perception must be changed. Malaysia’s desire to be a high-income economy is actually helped by workers getting a higher level of minimum wage.

Our over-reliance on foreign workers willing to accept low wages has hindered the nation’s transformation to automated high-technology industries that are needed to drive our economy forward. Experts argue that the six million legal and illegal foreign workers in the country have suppressed and stagnated wages.

Upping the minimum wage will not only reduce this unhealthy reliance on imported labour but will also encourage local workers to find employment and spend a little extra, a boost to the economy.

The wages to GDP ratio of higher performing economics, such as Singapore is 43%, Taiwan is at 46.2%, South Korea is at 43.7% and Japan is at 51.9%; compare that with Malaysia’s 35% – we have remained stagnated in low wages.

It is important that we strive to create a strong, viable middle class wage group, which is well-known to be the engine of our future growth. In past decades, we relied on low wages so we could manufacture goods cheaply for the export market. This is now not an effective strategy, as countries such as China, Thailand and Vietnam, with their even lower wage structure, can play the low wage game better.

Raising the minimum wage allows us to grow our own consumer market. The economic multiplier effect will create investment opportunities for our businesses, and in turn employment opportunities, particularly for our youth.

Workers with higher wages, importantly, boost our local consumer market, as household consumption is the largest component of aggregate demand, between 50% and 60% for Malaysia.


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