Employers oppose higher minimum wages for Malaysian graduates

Union says TVET workers should be paid more, as country grapples with rising cost of living

Pressure to raise the minimum wage has led to an escalating row in Malaysia – with employer groups claiming political proposals to alter wage structures would create an unnecessary burden on business.

Deputy Prime Minister Ahmad Zahid Hamidi has joined forces with the Trades Union Congress to argue for a higher minimum wage of RM3,500 (US$900) for technical and vocational education training (TVET) workers and university graduates.

That would represent a substantial rise on the current minimum wage – which stands at between RM920 and RM1,000, depending on location – and would fundamentally alter wage structures in the country.

Shamsuddin Bardan, executive director of the Malaysian Employers Federation (MEF), told Free Malaysia Today News that he was opposed to the move.

“For TVET workers, RM3,500 is way above the market rate. Any rate beyond a country’s minimum wage should be determined by market forces,” Bardan said.

The current market starting rate for TVET workers is between RM1,800 and RM2,200, according to the MEF. Degree holders earn between RM2,000 and RM2,500 while Masters graduates take home RM3,500.

Bardan argued that while certain countries use a fixed minimum salary for a certain skill set, Malaysian employers often raise wages when the market deems it necessary.

“We shouldn’t regulate wages this way,” he said. “We will end up killing market rate wages and put a strain on a company’s finances.”

Evidence suggests that Malaysian workers are struggling with the spiralling cost of living, despite strong wage growth in recent years.

According to the Employees Job Happiness Index 2017 survey by JobStreet.com, almost one in three (29 per cent) Malaysian employees want a pay rise, and 52 per cent of the domestic workforce say reward is a fundamental factor in their motivation to work.

Bank Negara said in its 2017 Annual Report that a new ‘living wage’ would enable households to afford a ‘minimal acceptable’ living standard, which includes the ability to meaningfully participate in society, opportunity for personal and family development as well as freedom from severe financial stress.

The bottom 40 per cent of households experienced a substantial increase in average income of 6 per cent a year between 2014 and 2016, but low levels of base salary and rising costs of living meant the real effects of this rise were minimal, according to the bank.

After accounting for the increase in the cost of living, households in this category actually experienced only a 3.8 per cent growth in real income.

Using Kuala Lumpur as an example, the bank estimated that a living wage in the city in 2016 would stand at around RM2,700 per month for a single adult. The monthly living wage for a couple with two children would have been RM6,500.

Half of working Malaysians earned less than the national median of RM1,703 (£311) in 2016, and in April the government announced that the country’s civil servants and teachers would enjoy a pay rise.

At the 16th Majils Amanat Perdana Perkhidmatan Awam, Prime Minister Datuk Seri Najib Razak said public school teachers would be able to apply for an additional pay grade to aid their career progression.

“The government has agreed to create another layer, which is DG56, for academic services officers who have been in DG54 for more than five years, and have given excellent service.

“The creation of this DG56 grade would give promotion opportunities to 323 officers, with a financial implication of RM7.4m (US$1.9m), beginning January 1, 2019.”

Additionally, Najib promised RM1.46bn (US$377m) in salary hikes for civil servants.

Retired civil servants will also get a 1 per cent increment to their pension rate from July 1 until December 31, a further increase on the 2 per cent hike received by all pensioners in January 2018.

Explore our related content

Factsheets

Pay structures and pay progression

Outlines the purpose of pay structures and progression, including the common ways of structuring pay and of determining, reviewing and controlling pay progression

Read more
Top