Reality of minimum wage

IN 2012, the Malaysian government implemented the Minimum Wages Order with the objective of eradicating poverty and building a more egalitarian society. Since then, several amendments have been made to increase the minimum wage rate.

The latest amendment effective May 1, 2022 will see the minimum wage being raised to RM1,500. While the scope of the proposed adjustment remains unclear, it is worthwhile to step back and examine the system of minimum wages.

After all, any rise will be in vain if the mechanism is inherently flawed. In my humble opinion, the pitfalls of the current framework lie in its coverage, decision-making process and enforcement.

In determining the beneficiaries of the minimum wage policy, the International Labour Organisation (ILO) says no one should be left behind. In Malaysia, the reality is that only formal employees are accorded protection in spite of the current upward trend in gig employment and informal labour.

Ironically, the 12th Malaysia Plan acknowledges the lack of proper welfare protection for gig workers. Yet, no mention was made of this point in the proposed amendment, and it is most likely that the large group of informal workers will continue to be excluded from the minimum wage umbrella. Domestic workers, the category that is particularly vulnerable to unfair treatment, are also excluded.

Lack of transparency in the decision-making process also undermines the quest for wage equality. The government cannot expect employers to follow every increment to the minimum wage mindlessly without giving them the necessary justifications.

Evidently, the 25% wage hike in this round has provoked furious backlash from employers who are contending that the pandemic and global political turmoil have badly affected their businesses. Thus, negotiations and engagements with the stakeholders should be made public as a matter of right and for the sake of enhancing compliance.

While the government attempts to cushion the blow by making exemptions to certain sectors (e.g. companies in the private sector that have fewer than five employees), it creates another inexplicable discrimination among workers. Does the cost of living differ between employees who are earning RM1,200 and RM1,500? Not only does it create an unjust dichotomy, but it also opens the floodgates for enterprises to exert influence on the government.

Instead of catering to the disparate requests and creating complex wage regimes, a gradual and standardised transition would be more favourable in the enforcement of the minimum wage rate.

According to the ILO, over 50% of workers are paid below the minimum rate in some countries. While there are no official Malaysian statistics in this respect, the wage theft phenomenon is not novel in our homeland. There are unscrupulous employers taking advantage of the power asymmetry and withholding salary partially or in full. This is most rampant among migrant workers especially those who are undocumented.

Under Section 43 of the National Wages Consultative Council Act 2011, employers who fail to remunerate in accordance with the minimum wage are liable to a fine up to RM10,000 for each employee. It is safe to say that the existing law provides sufficient deterrence.

Accordingly, simplification of administrative procedures should be the next course of action.

The cost and time required in the ordinary court process is a luxury for those who are struggling to make ends meet. A speedy and cost-effective proceeding is therefore of paramount importance to allow meaningful remedies for mistreated workers.

The authorities ought to be mindful of the ultimate goals of the minimum w age policy, which is to uplift the standard of living and bridge the chasm between social classes.

ONG CHENG HONG , Penang