State Based Minimum Wage Will Leave Some With Weaker Growth Says Economist

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The Federation of Malaysian Manufacturers recently called for the introduction of state- or regional-based wage models, saying they would reflect local economic realities more effectively. (Bernama pic)PETALING JAYA: An economist has dismissed a proposal that the government introduce state or regional models to determine future minimum wage adjustments

Yeah Kim Leng of Sunway University warned that a varied minimum wage could potentially widen economic disparities among states.
“This might happen if states paying a lower minimum wage attract industries that pay low wages, leading to a higher concentration of low-end or low-value industries,” he said.
Such a situation would leave development in the state stunted by weaker economic growth, slower industrialisation, lower purchasing power, and a fall in living standards.

The Federation of Malaysian Manufacturers had suggested that the government develop state- or regional-based models for future wage adjustments, arguing that the approach would reflect local economic realities more effectively.
Its president, Soh Thian Lai, expressed the federation’s concern that a nationwide implementation of the RM1,700 minimum wage might have an uneven impact across different states and industries.
In response, human resources minister Steven Sim said a uniform nationwide minimum wage was the most suitable approach for now, but assured that feedback from all stakeholders would be considered.
Yeah said one advantage of a state-based rate is that small and medium-sized enterprises (SMEs) operating in states with a lower minimum wage rate could benefit from higher profit margins because of lower labour costs.
“Labour-intensive SMEs will benefit more from having a minimum wage that varies across states, provided that the relocation costs are lower than the labour cost savings,” he said.
Unless the cost of living differences between states and economic diversity can be clearly defined, Yeah said the current mix of a national minimum wage, with adjustments for Sabah and Sarawak, will likely stay.
Standardised minimum wage better
Barjoyai Bardai of Malaysia University of Science and Technology said a standardised national minimum wage was ideal for Malaysia.
“Even if we were to implement a different minimum wage rate for different states or regions, it would not necessarily solve the problem,” he said.
This is because there are employers who are capable of paying higher salaries but choose not to do so because of the minimum wage policy.
“Alternatively, we could introduce some variety to the standard minimum pay by making several exceptions to the general policy,” he said.
These exceptions could be made for states such as Kedah, Kelantan, Terengganu and Sabah due to differences in living standards and economic development. - FMT

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