No details yet, but the National Wages Consultative Council has submitted their recommendation (excerpt):
KUALA LUMPUR: The Government has decided on the national minimum wage and the details will be announced by the Prime Minister.
Deputy Prime Minister Tan Sri Muhyiddin Yassin, who disclosed this, said an agreement had been reached between various parties and the Human Resources Ministry…
…However, Muhyiddin did not elaborate if a fixed amount had been reached by the Government in the National Wages Consultative Council the tripartite body comprising employer and employee organisations and the Government.
He said all relevant factors such as cost of living, inflation, demographic trends, the effects on employers and the economic impact were taken into account during deliberations…
…It was reported that the Government was looking at a minimum wage of between RM800 and RM1,000 for some 3.2 million workers in the private sector.
Close to 33% of such workers are said to be earning less than RM700 a month below the income poverty line of RM763 a month.
On Friday, Human Resources Minister Datuk Seri Dr S. Subrama-niam said the minimum wage policy was expected to be announced later this month.
Point of fact – most other countries minimum wage policies cluster around 40% of the average national wage, which should put Malaysia’s at around RM800. But that’s too low relative to the poverty line (it’s barely RM50 apart). On the other hand, putting it much higher would be increasingly disruptive economically.
So perhaps a graduated approach might be best – RM800 this year, then whack it up RM50 every year for the next 4 years or so. That won’t make anybody happy, but it gives an opportunity for every side to adjust (and save face).
Now as to the effects – if the minimum wage comes in at around the RM800 level, I wouldn’t expect too much of a negative impact, at least not immediately.
But there will be a cascading effect on wages up the scale, which will raise both supply side and demand side inflation over time – if a basic worker gets an effective 25% increase in base pay, you think his/her supervisor ought to be getting anything less? And that will raise wage costs, particularly in those industries which are sensitive to worker pay, i.e. services. So your teh tarik and roti canai are going to get a bit more expensive pretty soon.
Employers might also start being more wary over hiring as well as cutting benefits in-kind and allowances, so I’d also expect a minor increase in long term unemployment, though at RM800 it won’t be much.
As the minimum wage gets further away from the poverty line, you should expect both these effects – inflation as well as unemployment – to accumulate faster.
You’re not going to be able to do much about the former (it’s a natural consequence of becoming a higher income nation), but for the latter, I would think we should start seriously considering what the IMF suggested – implement unemployment insurance, funded through employer and employee contributions.
It’s not exactly having your cake and eating it too, but a second best alternative.