Speaking in Parliament on Thursday (Nov 30) as he tabled a much-anticipated White Paper on the Progressive Wage Policy, Economy Minister Rafizi Ramli said the voluntary programme will target 1,000 companies for the pilot, with a focus on micro small and medium enterprises.
Only Malaysian employees who earn less than RM5,000 (US$1,076) monthly will be eligible for the programme, with workers from multinational and government-linked companies exempted from participating in the project, he added.
“The progressive wage policy model that will be introduced involves a progressive increase in wages, in line with the increase in employee productivity,” said Mr Rafizi.
“This policy will not only improve the skills of employees, but employers will also benefit through increased productivity, employee loyalty and competitiveness.”
Mr Rafizi noted that Malaysian employees faced issues of low wages, with 73.3 percent of a formal workforce of 6.54 million people earning less than RM5,000 a month.
He also said that according to official data, wages grew at an average of 4.1 per cent from 2011 to 2022.
“Low wages have had a serious impact on the lives of workers in this country, with a large portion of wages being used to cover basic expenses and not having the opportunity to make any savings,” he said.
Mr Rafizi said that companies participating in the programme would receive financial incentives from the government.
According to Mr Rafizi, participating companies will be eligible to receive cash incentives of up to RM200 monthly for 12 months for fresh graduates and entry level posts, while for non-entry-level posts, the incentive rate is proposed to be up to RM300 monthly for 12 months.
The granting of these incentives will be reviewed every year based on the government's fiscal position, he added.
The incentives will be paid after employers submit documents for their staff’s skills upgrading courses in training programmes identified and certified by the government.
Malaysian economics minister Rafizi Ramli speaking in parliament (Photo: Bernama)
Malaysia’s progressive wage model takes inspiration from Singapore’s Progressive Wage Model implemented and identified in specified sectors, where a multi-year salary increment schedule is set out for workers in tandem with skills acquisition on their part.
However, the government’s moves on this front in recent months has sparked public discussions over whether a progressive wage model is feasible in Malaysia, and what it could mean for the country’s minimum wage policy that covers all sectors.
Malaysia currently has a minimum monthly wage of RM1,500 per month, which was implemented in May of last year. Under the National Wages Consultative Council Act 2011, the minimum wage must be reviewed every two years.
In parliament, Mr Rafizi said that the government decided on a pilot programme first to fine-tune it, before expanding it to all employers in the future.
“An impact assessment will be made on the effectiveness of the pilot project and its viability before it is fully implemented,” he said.
The incentives will be given to companies that meet the conditions and criteria for a period of one year to enable the company to adjust its business plan.
He said that a survey of 2,038 workers found that 60 per cent of them supported the implementation of the policy.
For many young Malaysians, the road to owning a home is riddled with speed bumps. — Pexels
PETALING JAYA, Feb 26 — Most would agree that you truly reach adulthood the moment you own your own property.
Just like any other major milestone in life, getting there comes with its own set of challenges that many young Malaysians have to overcome before they can successfully purchase a home.
Here are five hurdles Malaysian millennials might encounter on the path towards home ownership:
1. Worrying about making the wrong choice, when is the ‘right’ time to buy?
Purchasing a home can be a major decision that many Malaysian youths feel overwhelmed by. — Pexels pic
Making the decision to buy a piece of property is a huge step that young locals aren’t quite brave enough to take yet.
Social news website SAYS’ 2019 Malaysian Home Survey among 8,568 Malaysians reports that one in five respondents had “(worries) about making the wrong decision”, especially since home ownership requires a hefty financial investment.
2. Unsure about loan application and loan rejections.
Pexels pic
Do you have enough saved up for a home in the future? — Pexels pic
A difficult loan approval process is a huge factor that dampens many Malaysians’ prospects of owning a home.
PropertyGuru’s Consumer Sentiment Survey in 2017 states that 33 per cent of Malaysians reported a tough approval process for bank loan applications which presents a major roadblock on the path to home ownership.
3. Starter salaries, not enough money saved for a downpayment.
The average Malaysian needs to plan carefully if they want to own a house with their current salary. — Reuters pic
The thought of dealing with a mortgage on the salary of a fresh graduate is making many millenials think twice about owning a house.
The Employee's Provident Fund statement in 2016 had said that 89 per cent of the working population in Malaysia earn less than RM5,000 monthly, making home ownership especially challenging.
Most millenials wouldn’t believe that they could own a house with that salary.
4. Renting or owning?
It’s not easy maintaining a modern lifestyle when you’ve got a mortgage weighing on your shoulders. — Unsplash pic
The hefty financial commitment to owning a home means young Malaysians will have to make some lifestyle changes if they want to stay afloat while having a house to their name.
This might mean foregoing luxuries such as weekend brunches and holidays overseas which have become staples for the modern generation.
Hence, a monthly instalment replacing these pleasures is the reason 33% of Malaysians in SAYS’ survey are saying ‘no’ to home ownership.
5. Lack of awareness on housing deals and promotions.
Housing deals and offers don’t seem to be showing up on the radars of young Malaysians. — Unsplash pic
While initiatives are in place to help young potential homeowners, many do not even know about the resources available to them that can ease the burden of property ownership.
A shocking 65 per cent of Malaysians in SAYS’ survey said that they had no clue about current housing offers and promotions.
This means that many young adults are currently unequipped with knowledge about navigating the property market.
In light of this, property developers EcoWorld have launched HOPE (Home Ownership Programme with EcoWorld), a comprehensive solution that promises to aid young Malaysians in their journey towards owning their dream home.
HOPE aims to make the dream of home ownership a full-fledged reality for millennials with the STAY2OWN (S2O) and HELP2OWN (H2O) programmes.
S2O will allow those wanting to stay in an EcoWorld project to rent their ideal home first with the confidence that they can become homeowners in the future.
A low monthly payment similar to the market rental rate also makes it particularly attractive for first-time homebuyers.
The option to rent first before buying also gives customers ample time to get their finances in order before committing to a new mortgage.
To top it all off, the rental savings will be used to offset part of the purchase price of the home, making it even more affordable for young Malaysians.
The H2O had successfully helped approximately 1,800 young homeowners and
upgraders own their choice EcoWorld home last year and you can be one
of them too! For more information on owning your dream home, visit
EcoWorld’s website (https://ecoworld.my/hope/) or Facebook (https://www.facebook.com/EcoWorldGroup/).
By Tan Mei Zi The Malay Mail
* This article is brought to you by EcoWorld. https://ecoworld.my/hope/
The promise of lucrative salaries are luring many Malaysians abroad but most are scams leaving these job seekers cheated and in need of rescuing.
The promise of lucrative salaries are luring many Malaysians abroad but most are scams leaving these job seekers cheated and in need of rescuing.
IT is ironic that at the same time there is an ongoing crackdown on illegal immigrants in the country, Malaysians are being detained in countries like Cambodia, South Korea and even Liberia.
These detentions have increased in frequency to the extent that Wisma Putra has issued a warning to “remind all Malaysians to be cautious of opportunities offered in foreign countries, and always verify the prospective employers”.
It used to be that foreigners (read: South Asians and South-East Asians) were drawn to Malaysia’s booming property and service sectors for better paying jobs.
They still are. On Monday, as part of operations codenamed Ops Mega 3.0, some 73 illegal immigrants, from Bangladesh, Indonesia, India, Pakistan, Sri Lanka and Myanmar, were held by the police under the Immigration Act. These foreigners were working at the Selangor wholesale market without proper work documents.
But how times have changed. The roles appear to be reversed, the Malaysians that have been detained overseas were for exactly similar offences – no proper work documents.
This time last year, The Star’s Bahasa Malaysia news portal mStar Online revealed that there was an estimated 5,000 Malaysians working and staying illegally in South Korea. The less fortunate ones were forced to live like refugees, always on the run from the authorities.
These Malaysians were lured by job advertisements that claimed they could earn a lucrative living in the land of K-pop. They paid recruitment agents thousands of ringgit in fees and entered South Korea with tourist visas.
Some of these Malaysians interviewed by mStar spoke about the hardships they faced including poor living conditions, tough working environment and employers holding back their salaries.
The Korean police and its justice ministry have begun cracking down on these illegals, starting from last month. Those without proper documentation will be immediately deported.
But Malaysians never learn. Two recent cases highlight the need for employees to be more vigilant and for the authorities to crack down on fly-by-night recruitment agents.
First, the case of the 47 Sarawakians who were detained in Cambodia since Dec 11 last year on charges of cheating and initiating and carrying out illegal online gambling activities.
It was reported that the Malaysians were promised jobs with lucrative salaries up to US$1,500 (RM6,100), and only found out that it was a scam when they arrived in Cambodia.
Their plight was highlighted in local media, and Wisma Putra, other leaders and representatives from Sarawak flew to Cambodia to secure their release. They were finally released on Feb 15.
The second recent case also involved Sarawakians. Eight of them were left stranded in Monrovia, Liberia, since Feb 4 after being offered logging jobs with wages up to RM9,000.
They were left stranded in the African nation without any money, and managed to survive because they were given rice by Malaysians working with Sime Darby in Liberia.
“If not for the rice, we would definitely be dead,” said Aji Surau, 39, after arriving at KL International Airport on March 4, one month after their ordeal.
He said they were abandoned in a house with no water and electricity and even resorted to eating papaya leaves to survive.
All these cases have one thing in common – dodgy job syndicates.
These unscrupulous agents rake in thousands of ringgit by promising the world to gullible locals.
“I want to advise Malaysians to be cautious when getting job offers overseas because this is not the first such incident.
“Check with the authorities concerned, especially the Malaysian representatives, whether the company offering the job is legitimate or not,” Foreign Minister Saifuddin Abdullah told reporters after the Liberian detainees were released.
The Cambodia and Liberia incidences appear to be genuine cases of people who were promised legitimate work contracts. But for every genuine case, there are five others who play the “victim” card.
In some countries where Malaysians are caught working illegally, they claimed that they were lured there with guarantees of proper employment with legal documentation. But the reality is that these people went overseas on tourist visas with the sole intention of getting a job, by whatever means.
Did you know that Malaysians are the worst visa abusers when it comes to overstaying in Australia?
According to a 2018 report from the Australian Department of Home Affairs, there were 62,000 people overstaying their visas and living illegally in Australia, with Malaysians making up the largest number. Between 2016 and 2017 alone, 10,000 Malaysians had overstayed!
As a result of this blatant abuse of tourist visas, the Australian authorities have made it harder for Malaysians to enter the country.
Australian-based news site news.com.au quoted a source from the Malaysian mission in Australia as saying that more Malaysians are being turned away at the airports, despite having the necessary visas approved before departure.
These visa scams are not only giving us a bad name, but also making it more difficult for genuine Malaysian tourists to visit Australia.
The latest “tourist” scam is via social media where syndicates are luring people to become drug mules by offering them cash and opportunities to go for tours abroad. But beware, if you’re caught deportation is the least of your problems. A stiff jail sentence or even the death penalty awaits.
Brian Martin, executive editor of The Star, would like to come
clean. He has vested interest in the proposed assessment rate hike since
he’s a resident of Kuala Lumpur.
Don’t get conned, Malaysians warned
Labour Dept: Only use services of licensed private recruitment companies
From “interviews” in coffeeshops to being persuaded to work in war-torn countries with lucrative salaries, Malaysians are being increasingly conned into travelling to work overseas, only to run into trouble.
This has prompted the Labour Department to advise those wishing to work overseas to only use the services of licensed private recruitment companies.
Seeking the services of licensed private job agencies under the Labour Department as provided in the Private Employment Agencies Act (1981) would help one avoid being conned or exploited by unscrupulous agents or employers overseas, it said.
“There’s a possibility that high salaries offered has become a pull factor in enticing Malaysians to work overseas.
“The Labour Department is always carrying out enforcement activities under the Private Employment Agencies Act (1981) to monitor the activities of illegitimate agencies and agents,” it said in response to questions by The Star.
The Labour Department, which is under the Human Resources Ministry, was responding to queries about the increasing media reports highlighting Malaysians being conned in overseas jobs.
While the Labour Department said it did not have any records on the numbers of overseas job scam cases affecting Malaysians, it encourages those with information on such cases to come forward.
“We have not received reports on job scams. However, victims can file a report with the Labour Department, including in Sabah and Sarawak for any job scams issues so that we can act accordingly,” it said.
MCA Public Services and Complaints Department head Datuk Seri Michael Chong said many of the job scam victims he encountered were enticed to work in African or Middle Eastern countries.
“Many of these countries are war-torn and so these ‘employment agents’ would tell the victims there is a lot of construction work to rebuild the country.
“These victims are mostly semi-skilled or unskilled workers who are attracted to the salaries which are supposedly from RM6,000 to RM10,000 a month,” he said.
However, he said, these victims were then cheated out of their salaries and left with little to no protection in a foreign country.
To stop these scams from occurring, he urged those interested to find work to carry out background checks on the company.
“You must make sure that there is an incorporated company so if anything happened to you, there is a company we could look for,” he said.
He also advised people to be wary if the salary offered is too good to be true, or if the job interview doesn’t take place in the company’s office.
“There are some ‘interviews’ which are even being conducted in coffeeshops,” said Chong.
He said he noticed more of such cases in recent years, especially as many Malaysians want to go overseas to eke out a livelihood.
Last December, 47 Malaysians were detained in Cambodia for being involved in illegal online gambling activities.
It was reported that they were offered jobs with lucrative salaries but had only found out that it was a scam when they arrived in Cambodia.
In February, eight Sarawakians were stranded in Liberia after allegedly being cheated by an employment syndicate.
The Malaysian Employers Federation called for a dedicated government agency to help protect the welfare of Malaysians who go overseas to work.
Its executive director Datuk Shamsuddin Bardan said this was to prevent them from being exploited and falling prey to illegal job syndicates.
“We have more than one million Malaysians working overseas but we have no proper body to monitor their affairs,” he said yesterday.
He noted that the Filippine government would ensure that their citizens who are sent overseas to work are properly trained and that they are employed by a legitimate company.
“The Filipino government would ensure that there is a proper document signed between the employer and agent, and if anything happens to the worker, the agent will be held responsible.
“We should emulate the Philippines to help our workers who aspire to work overseas,” he said.
However, he said the grim reality was that many Malaysian workers were enticed to work overseas because of the attractive pay, even if the details surrounding the employment were unclear.
“Employees are attracted to the higher wages offered in those countries, where the income promised triple or even quadruple what they are earning in Malaysia – and most of these jobs do not require high level of skills such as picking fruit.
“A difficult economic situation in Malaysia with the rising costs of living also contribute to the problem.
“We must re-look at our employment practices, how we remunerate our employees and develop our talent,” he said.
Malaysian Trades Union Congress secretary-general J. Solomon agreed that better policies and enforcement were needed to monitor the outflow of Malaysian workers to other countries.
“The authorities and their relevant agencies need to know where Malaysian workers are going when they travel overseas,” he said.
He said tighter enforcement was especially needed as more false job advertisements were disseminated easily on various social media platforms.
“It is high time the Cabinet review and encourage companies to comply with minimum wage level,” he said.
The low wages in Malaysia and the stigma of 3D (dirty, dangerous and difficult) jobs cause Malaysians to desperately seek employment outside the country, he added.
“These factors are causing Malaysians to go elsewhere to find alternative sources of income,” he said.
THE pull of the Chinese entertainment market is so great at the moment, actors from all over – including Malaysia and Singapore – are being drawn there.
There is a lot of money being spent in China, which broadly translates to more working opportunities as well as the potential for higher salaries.
According to London-based analyst IHS Markit, it is the world’s second biggest television market after the United States, as the country spent more than US$10.9bil (RM45bil) on TV programming in 2017.
China is also set to be the world’s largest film market by 2020, with its domestic theatrical revenue estimated to reach more than US$10bil (RM41bil) by then, according to reports.
Malaysia-born actress Tong Bingyu, 35, revealed that her pay for working on a single television drama series in China was the equivalent of a year’s salary in Singapore.
The former Mediacorp star, who used to go by the name Chris Tong and who had quit the Singapore company early last year, had previously claimed that was how much she was paid for her appearance on the upcoming Chinese TV period drama series One Boat One World.
She sounds hesitant when pressed, however. In a telephone interview recently, the 35-yearold says in Mandarin: “It’s true that it is possible to get a lot more money in China. The market there is huge and if you get picked for big projects, you can be well compensated.
“But I don’t want people to get the wrong idea that it’s easy money. Just because you pack up and move to China doesn’t mean you will be rich. It also depends a lot on luck and whom you know.”
Her stroke of luck came four years ago when she met a Chinese producer from popular TV channel Hunan Television through a good friend.
That producer eventually helped set her up for acting gigs in China.
Besides One Boat One World, Tong also snagged a role in the wuxia drama The Heaven Sword And Dragon Saber, which is based on Louis Cha’s novel of the same name.
Tong says of the producer: “She gave me so much solid advice. She pointed out very frankly that I’m not that young anymore and that I should diversify.”
Which is why Tong decided to try her hand at producing as well.
Currently, she is busy working as a producer on the Chinese action spy movie Zhi Sheng Si Yu Du Wai (Beyond Life And Death), which boasts a budget of 300mil yuan (RM182mil).
She was roped in after she met famed Hong Kong producer Manfred Wong, who is also behind the film.
Tong, who is managed by her Malaysian husband Kee Kai Loon, 40, says: “It’s stressful because I’m so new to this job, but it has also been very exciting. I’m suddenly asking questions like, ‘How much does this cost? What will it look like?’
“When I was at Mediacorp, I was such a passive person - I just went to work to act.”
The film, which she describes as an explosive actioner in the vein of China’s hit war films Operation Red Sea (2018) and Wolf Warrior (2015), is slated for release later this year.
Coming up, she will also produce a Chinese Web series, for which she declines to reveal the details.
When she was in Singapore, the actress played the lead in Mandarin TV series such as family drama Mightiest Mother-In-Law (2017) and nursing drama The Caregivers (2014).
“I will unlikely get the same star status as an actress in China and that’s OK. The reality is there are so many younger and more beautiful actresses who have been working in China for much longer than I have,” says Tong, who has been based out of Beijing for the past two years.
“I just take every day there as an opportunity to learn new things. Besides, now that I’m doing the producing thing, I realise that I’m loving it. If all goes well, I might be a producer full-time in the future.”
– By Yip Wai Yee, The Straits Times/Asia News Network
THE Malaysian Employers Fund (MEF) announced its findings of four latest publications for 2018. The publications focus on the forecast of salary increases and bonuses for 2019. The outlook was “bleak”, according to the survey due to the global recession, increasing social costs and political uncertainties following GE14 which were among factors influencing the employers’ cautious attitude.
A few incentives were placed into the labour structure of the companies surveyed including productivity linked wage system (PLWS) and the Discrimination Reporting Procedure.
About 90% of companies and more indicated that the main reasons that they implemented PLWS was to reward good employees followed by aiming to improve productivity (which more than 80% responded) and to motivate average employees (more than 70%).
The findings also focused on the types of leaves provided where all participating companies provided annual leave and sick leave for top/senior managers, managers, execu- tives and non-executives.
The average total hours of total working hours per week for top/senior managers and managers were considered where they worked 41 hours compared to the executives where the average total working hours per week was 42 hours. In the case of non-executives the average total working hours was 43 hours.
About 42.5% of respondent companies implemented flexible working hours at the workplace. With implementation of flexible work arrangements 82.4% of the respondent companies indicated that there was increased employees’ engagement, commitment and satisfaction, quality of work and quantity of output (62.7%) and the company’s ability to retain talent (62.7%).
The survey for executives and non-executives were participated by 242 companies from manufacturing and non-manufacturing sectors.
The executive report covered 160 benchmark positions of 14330 executives while the non-executives report covered 324654 non executives with 109 benchmark positions. - The Star
Prized
job: While long-term security like the pension scheme free healthcare
and easy loans have been among the perks of joining the public service,
many job seekers now want to become civil servants because it pays well.
— Bernama
Most workers not paid enough to achieve minimum acceptable living standard
Wages too low, says Bank Negara - Survey: most workers not paid enough to achieve minimum acceptable living standard
ALTHOUGH the income levels of Malaysians have increased significantly over the years, voices of discontent are mounting over the decline in purchasing power.
Low and depressed salaries are among the grouses of executives and non-executives amid the apparent lifestyle changes of Malaysians.
With the rising cost of living, they lament that there is now less room for long-term savings and investments.
According to the Employees Job Happiness Index 2017 survey by JobStreet.com, one in three Malaysian employees want a pay rise, with rewards constituting 52% of the domestic workforce’s motivation to work.
In its 2017 Annual Report, Bank Negara points out that the expenditure of the bottom 40% (B40) of Malaysian households has expanded at a faster pace compared with their income.
From 2014 to 2016, the average B40 income level grew by 5.8% annually, marginally lower than the 6% growth in the B40 household spending in the same period.
It is also worth noting that half of working Malaysians only earned less than the national median of RM1,703 in 2016.
The central bank, in consideration of the low-wage conundrum, has recently recommended that employers use a “living wage” as a guideline to compensate their employees for their labour.
Essentially, the living wage refers to the income level needed to achieve a minimum acceptable standard of living, depending on the geographical location.
Citing Kuala Lumpur as an example, Bank Negara estimates that the living wage in the city two years ago was about RM2,700 for a single adult. The living wage estimate for a couple without a child was RM4,500, while for a couple with two children, the living wage was RM6,500.
As much as Malaysians support higher wages, which can outgrow escalating living cost, the bigger question is whether their employers are willing to increase wages significantly.
Also, is it realistic for employers to pay higher salaries in line with the suggested living wage?
Speaking to StarBizWeek, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan says that the living wage is unsuitable for adoption in Malaysia – for now.
He believes that the living wage will turn out to be damaging to the domestic labour market, given the rising cost of doing business in recent times.
<< Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
Shamsuddin: While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
“The living wage concept is unrealistic in Malaysia for the time being. While employers in Malaysia are more than happy to compensate workers for their work, people must also understand that they are bogged down by escalating costs.
“However, if the workers are proactive and upskill themselves to increase their productivity, then I do not see any reason for employers to refrain from offering higher pay packages.
“The Government on its part, should not micro-manage the economy to the extent of telling the employers how much to pay their workers. Instead, the Government can provide various incentives to the employers to bring down costs, which will translate into higher salaries or even exempt the employees’ bonuses from tax,” he says.
Socio Economic Research Centre executive director Lee Heng Guie welcomes Bank Negara’s living wage guideline “to prevent a wage employee from the deprivation of a decent standard of living”.
In order to push for the acceptance of a living wage in Malaysia, Lee recommends that government-linked companies (GLCs) adopt the concept gradually.
“The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
“This would require extensive consultations and engagements with the stakeholders.
“Perhaps, as one of the largest employers in the country, GLCs can incorporate the living wage clause in their suppliers’ procurement contracts,” he says.
Concerns about Malaysia’s low-wage environment are not only centred on the low-skilled workers but across-the-board, as even executives lament about being lowly-compensated.
Are Malaysians being paid enough?
Based on data from the Statistics Department’s Salaries and Wages Survey Report 2016, most Malaysian workers are still paid significantly lower than the desired amount to achieve “minimum acceptable living standard”, at least in Kuala Lumpur.
Nearly 50% of working adults in Kuala Lumpur earned less than RM2,500 per month in 2016, notably lower than the RM2,700 living wage as suggested by Bank Negara.
In fact, up to 27% of households in Kuala Lumpur earned below the estimated living wage in 2016.
While wage growth has exceeded inflation over the years, real wage growth has been largely subtle. Real wage refers to income adjusted for inflation.
According to the MEF’s website, the salaries of executives were expected to grow by 5.55% in 2017, compared with 6.31% in 2013. As for non-executives, the average salary was anticipated to increase by 5.44% in 2017, down from 6.78% in 2013.
Given the 3.7% headline inflation registered in 2017, executives’ salaries may have just inched up by 1.85% on average, after factoring in inflation.
As for non-executives, their real wage could have grown by 1.74%, lesser than the executives in Malaysia.
While a slight moderation in headline inflation is expected this year, the purchasing power of Malaysians is unlikely to improve significantly.
In an earlier report by StarBiz, Shamsuddin described 2018 as a “bad year for employees and employers”, and projected Malaysians’ average salary increment to be lower than last year.
He blamed several new policies and measures introduced by the government such as the mandatory requirement for employers to defray levy for their foreign workers and the introduction of the Employment Insurance System, which would increase the costs borne by domestic businesses.
“It will be difficult for employers to raise salaries after this, given such dampeners,” he was reported as saying.
The biggest challenge now is to strike a balance between the market’s ability to compensate a worker and the worker’s required income level to achieve a minimum acceptable standard of living.
Sunway University Business School professor of economics Yeah Kim Leng says that more efforts have to be made to enhance the business and investment climate, in order to entice existing firms to expand and upgrade while new firms and start-ups emerge to create more high-paying jobs.
<< Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth.
Yeah: A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth.
He also calls upon business owners and employees to forge appropriate wage-setting mechanisms, which are benchmarked against the productivity of the workers.
“The Government should consider additional fiscal incentives for firms that provide worker benefits to meet the living wage standard. For example, double tax deduction for transport allowance and other cost of living adjustments for the lower-salaried employees,” states Yeah.
Meanwhile, Lee opines that employees should be given a higher share of the profit generated by their employers moving forward, in line with the practice in many high-income nations abroad.
“It is actually reasonable for Malaysian employers to allocate a larger chunk of their profits to reward their workers and motivate them,” he says.
In 2016, the compensation of employees to gross domestic product (CE-to-GDP) ratio in Malaysia improved to 35.3%. The CE-to-GDP ratio shows the workers’ share in the profits made by business owners.
For every RM1 generated in 2016, 35.3 sen was paid to the employee and 59.5 sen went to corporate earnings, while five sen was given to the government in the form of taxes.
In its 11th Malaysia Plan, the Government aspires to increase the CE-to-GDP ratio substantially to 40%, from 34% in 2013.
While Malaysia’s CE-to-GDP ratio has continued to improve over the years, it is notably lower than several other high and middle-income countries.
The 11th Malaysia Plan document stated that the country’s CE-to-GDP ratio was lower than Australia (47.8%), South Korea (43.2%) and even South Africa (45.9%).
In an earlier media report, however, Malaysian Institute of Economic Research executive director Zakariah Abdul Rashid hinted that Malaysia was unlikely to reach its CE-to-GDP ratio target by 2020.
This was mainly as a result of Malaysia’s lower-than-expected productivity growth.
Low-wage conundrum
According to Bank Negara, the main underlying cause of Malaysia’s low-wage environment is the high numbers of cheap foreign workers.
Governor Tan Sri Muhammad Ibrahim says that the country should cut back on its foreign worker dependency to drive higher wages for Malaysians across-the-board.
“In Malaysia, our salaries and wages are low, as half of the working Malaysians earn less than RM1,700 per month and the average starting salary of a diploma graduate is only about RM350 above the minimum wage.
“It is high time to reform our labour market by creating high-quality, good-paying jobs for Malaysians,” he says.
Echoing a similar stance, Yeah says that the continuing reliance on foreign workers has resulted in a predominantly low wage-low productivity-low value economy, with many features of a middle-income trap.
“On one end of the wage-skill spectrum, the low-skilled jobs are being substituted by easy availability of unskilled foreign workers, thereby keeping the blue-collar wages from rising.
“At the other end, skilled job wages are being depressed by insufficient high-wage job creation, weak firm profitability amid rising market competition and excess capacity, industry consolidations and other factors resulting in a slack labour market,” he says.
<< Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
Lee: The enforcement of commitments toward the living wage is a complex and costly issue, and more importantly, should be paid voluntarily by the employers.
It is worth noting that the share of high-skilled jobs has reduced to 37% in the period from 2011 to 2017, as compared to 45% from 2002 to 2010.
Malaysia has come a long way since its independence, transforming itself from a largely rural agragrian country to a regional economic powerhouse, which is driven by its strong services and manufacturing sectors.
While industrialisation and automation have grown robustly since the 1990s, economists feel that the country has not managed to substantially move up the value chain compared with other countries such as Singapore.
The lack of a high-skilled workforce, low productivity, employment opportunities to cater to high-skilled professionals and the presence of cheap foreign workers have all weighed down on the Malaysian economy, particularly the income levels of Malaysians.
Citing the examples of Singapore and Australia, which are successful in raising wages historically, Yeah says that structural reforms should be undertaken in Malaysia to reverse the low-wage conundrum.
“A good quality and inclusive education system coupled with sound economic policies and effective implementation have enabled the two countries to sustain growth, raise productivity and wages and shift to higher-value activities,” he says.
Sources: by Ganeshwaran Kana, The Star
Economist: Manage labour issues to achieve high-income economy
Cheap manpower: While Malaysia has clearly
benefitted from the presence of foreign workers, the role that foreign
workers play in the Malaysian economy must keep up with the times.
WHY are wages still low in Malaysia?
Well, there are six words to describe the main reason for this – “high dependence on low-skilled foreign workers”.
The issue of Malaysia’s huge reliance on low-skilled foreign labour has been raised time and again, but only moderate progress has been made in alleviating the situation.
Low-skilled foreign labour remains a prevalent feature of Malaysia’s economy, and according to Bank Negara, it is a major factor suppressing local wages and impeding the country’s progress towards a high-productivity nation.
As the central bank governor Tan Sri Muhammad Ibrahim puts it, Malaysia is currently weighed down by a low-wage, low-productivity trap, with the contributing factor being the prolonged reliance on low-skilled foreign workers.
While their existence may benefit individual firms in the short term, they could impose high macroeconomic costs to the economy over the longer term.
“Easy availability of cheap low-skilled foreign workers blunts the need for productivity improvement and automation. Employers keep wages low to maintain margins,” Muhammad says.
“Unfortunately, this depresses wages for local workers. The hiring of low-skilled foreign workers also promotes the creation of low-skilled jobs,” he adds.
From 2011 to 2017, the share of low-skilled jobs in Malaysia increased significantly to 16%, compared with only 8% in the period of 2002 to 2010. Apart from that, local economic sectors that rely on foreign workers such as agriculture, construction and manufacturing also suffer from low productivity.
Nevertheless, it is an undeniable fact that foreign workers do contribute somewhat to Malaysia’s economic growth.
The World Bank, in its study about three years ago noted that immigrant labour both high and low-skilled, continued to play a crucial role in Malaysia’s economic development, and would still be needed for the country to achieve high-income status by 2020.
The global institution’s econometric modeling suggested that a 10% net increase in low-skilled foreign workers could increase Malaysia’s gross domestic product (GDP) by as much as 1.1%. For every 10 new immigrant workers in a given state and sector, up to five new jobs may be created for Malaysians in that state and sector, it said.
Even so, the World Bank acknowledged that the influx of foreign labour did have a negative impact on the wages of some groups.
Its study found a 10% increase in immigration flow would reduce wages of the least-educated Malaysians, which represents 14% of the total labour force, by 0.74%. Overall, a 10% increase in immigration flow would slightly increase the wages of Malaysians by 0.14%.
According to Muhammad, while some argue that foreign employment creates economic activities, which consequently create jobs for local employment, it is neither the most efficient nor the desired route to create more mid-to-high-skilled jobs.
“Compared with local employment, foreign workers repatriate a large share of their incomes, which limits the spillover or multiplier effect on the domestic economy,” he explains.
Total outward remittances in 2017 stood at RM35.3bil, of which the bulk was accounted for by foreign workers.
In addition, Muhammad says high dependence on low-skilled foreign workers will also have an adverse effect of shaping Malaysia’s reputation as a low-skilled, labour-intensive destination.
Bank Negara says while Malaysia has clearly benefitted from the presence of foreign workers, the role that foreign workers play in the Malaysian economy must keep up with the times.
The central bank believes critical reforms to the country’s labour market are very much within its reach, and it should continue to gradually wean its dependence on foreign workers.
Malaysia should seize the opportunity now to set itself on a more productive, sophisticated and sustainable economic growth path, it says.
According to Muhammad, cutting back on foreign worker dependency can help to drive higher wages for Malaysians across-the-board.
The Government’s efforts in reducing the country’s dependency on low-skilled foreign workers have been ongoing since the implementation of the 8th Malaysia Plan (2001-2005), with greater clarity and a renewed focus to resolve the issue at hand upon the implementation of the 11th Malaysia Plan.
This has resulted in the steady decline in the share of documented foreign workers from 16.1% in 2013 to 12.0% of the labour force in 2017.
More can be done to build on the progress made, Bank Negara says, while proposing a five-pronged approach to managing foreign workers in Malaysia.
Firstly, it says, there must be a clear stance on the role of low-skilled foreign workers in Malaysia’s economic narrative. Secondly, policy implementation and changes must be gradual and clearly communicated to the industry.
Thirdly, existing demand-management tools (such as quotas, dependency ceilings and levies) can be reformed to be more market-driven, while incentivising the outcomes that are in line with Malaysia’s economic objectives.
Fourthly, there is room to ensure better treatment of foreign workers, be it improvements in working conditions or ensuring that foreign workers are paid as agreed. Lastly, it is also important to note that the proposed reforms must be complemented with effective monitoring and enforcement on the ground, particularly with respect to undocumented foreign workers.
An economist tells StarBizWeek that addressing the high reliance on foreign workers is pertinent for Malaysia’s transition into a high-income economy.
“Malaysia needs to shift its focus from importing cheap labour to managing labour flow that can maximise growth and facilitate its structural adjustment towards a higher income economy,” he says.
“It has been far too long for our economy to be swamped with foreign workers who are unskilled, or have low skill sets that could not contribute meaningfully to Malaysia’s aspiration of becoming a high-income economy,” he adds.
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