NABILAH BINTI TALIB

17204258

MINIMUM WAGE
POLICY IN MALAYSIA
BACKGROUND OF POLICY
Malaysia's first minimum wage was imposed on May 1, 2012, and declared
official on July 16, 2012.
Minimum Wage Order 2012 implementation began January 1, 2013.
(Peninsular Malaysia, RM900; Sabah, Sarawak, and Labuan, RM800).
Malaysia's government authorised a new private sector minimum wage in
2016, excluding domestic employees (RM1000 in the Peninsular Malaysia,
and RM920 in Sabah, Sarawak and Labuan).
The administration recommended new minimum wage rates for January 1,
2019. (RM1100)
Malaysia has raised the national monthly minimum salary from 1,200 ringgit
(US$276) to 1,500 ringgit (US$345) in 2022 as required by the National Wage
Consultative Council Act 2011.

OBJECTIVES
THE IMPACT ON LABOUR MARKERT
1) Ensuring the basic needs of workers and their
families are met,
2) Providing sufficient social protection to workers,
3) Encouraging industry to move up the value
chain by investing in higher technology and I) INCREASE PRODUCTIVITY
increase labour productivity, and Efficiency wages theory says higher pay boost worker
4) Reducing the nation’s dependence on unskilled productivity (Akerlof, 1982; Akerlof & Yellen, 1990).
foreign labour. Efficiency wage theory reverses the neoclassical production-
to-wages order to explain how wages relate to output.
Efficiency wage theory says high pay generate involuntary
unemployment, so individuals work harder to avoid getting
dismissed (Bowles, 1985; Ho & Yap, 2001; Yusof, 2008).
Productivity increases with more work.
Many studies relate wages to productivity in established and
developing nations (Forth, Mason, & O'Mahony, 2002;
Wakeford, 2004; Montuenga-Gómez, Fernández, & Romeu,
2007; Narayan & Smyth, 2009).

III) INCREASE WORKFORCE

II) REDUCE NON-WAGE BENEFITS The minimum wage law will help 27% of workers
nationally.
Multiple studies suggest that minimum Peninsular Malaysians would receive a 33% rise and
wage rises affect employee benefits. East Malaysians a 38% one.
According to Hashimoto (1981) and 43% of agricultural workers were paid less than
Neumark and Wascher (2001), employers minimum wage before the programme. The
eliminate training in reaction to greater agricultural industry will be most affected.
remuneration.
According to Mincer and Leighton (1980),
a low minimum wage discourages
individuals from seeking education and
training.
The minimum wage reduces workers' on-
the-job training time.

References
BNM. (2013). Potential Impact of the Minimum Wage Policy on the Malaysian Economy Introduction Malaysia implemented
a minimum wage policy on. Bank Negara Malaysia. Retrieved June 4, 2022, from
https://www.bnm.gov.my/documents/20124/830190/cp04_005_box.pdf
International Labour Organization. (n.d.). Chapter 7: Monitoring the effects of minimum wages: 7.6 Effects on labour
productivity. ILO. Retrieved June 4, 2022, from https://www.ilo.org/global/topics/wages/minimum-
wages/monitoring/WCMS_438881/lang--en/index.htm
Senasi, V., Khalil, S., & Parasuraman, B. (2021). Minimum Wage Policy: Is There Any Impact on Low Skilled Workers in
Electrical and Electronics Companies in Malaysia? International Journal of Business and Society, 22(1), 422-430.
10.33736/ijbs.3186.2021