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Election Watch

Minimum wage ripple effect

Source: Malay Mail
Date: 6 March 2012

Economists welcome move but express concerns over employers reducing overtime, commissions and perks to cover losses

PETALING JAYA: The minimum wage policy which has been lauded by various quarters continues to also attract criticisms from groups which believe there will be a ripple effect on both employers and employees.

Various quarters, including economists, analysts, employers and consumer groups have raised concerns on the policy which will be announced by Prime Minister Datuk Seri Najib Razak soon.

Analysts said there was a possibility that employers may resort to reducing staff benefits to cover their “losses” when the new minimum wage is introduced.

Rating Agency Malaysia Berhad’s (RAM) group chief economist Dr Yeah Kim Leng said while he welcomed the move to implement the policy, there was a chance that employers may resort to cutting back on employees’ benefits as they may face trouble paying workers.

“If the figure is too high, employers would not be able to afford paying their workers. They might slash overtime, commissions and other perks,” he said, adding it all depended on what the figure would be.

“Of course, the time period of how long the wage policy will be valid is also an issue. Employers, in fear of paying the employees for a long period would find ways to balance their accounts by removing benefits,” he said.

He said the introduction of the policy was the right thing to do.

“The cost of living is getting higher everyday and people should be earning a decent pay. It will also help reduce the gap between the rich and the poor,” he said.

Asian Strategy and Leadership Institute (Asli) Centre of Public Policy Studies director Tan Sri Ramon Navaratnam told The Malay Mail that employers who had to follow the new pay scale might remove workers’ perks.

“To cover back, employers may not pay overtime, reimburse their claims or give travelling allowances. Employers may take the easy way out. They also would not improve or spend more on research and development or training,” he said.

Ramon said employers would even resort to hiring more foreign workers as they would be cheaper.

While he applauded the move to introduce the policy, he stressed that the government must make sure that workers were not shortchanged.

“The workers must not be getting less. If they are getting less, there is no point in introducing the increase.

There must a genuine collaboration between the employers, employees and the government,” he said.

Bank Islam Malaysia Berhad’s chief economist Azrul Azwa Ahmad Tajudin said the government and the all parties concerned must preempt this situation.

“Of course, there is a possibility that the employers would find difficulties in following the new minimum wage scale. If that is going to be the case, the government should step in now and find a solution. The new minimum wage is supposed to benefit workers and their perks and benefits must also be maintained,” he said.

Human Resources Minister Datuk Seri Dr S. Subramaniam said Malaysians would not be disappointed with the new minimum wage scale.

“I won’t say the amount, let our prime minister announce it. All I can say is that the people won’t be disappointed,” he said adding that the new minimum wage policy will not cause the country’s economy to collapse.

The minister said with the new implementation, the government expects for employees’ productivity to increase.

“If compared with Singapore, Taiwan, Japan and South Korea, our wages are much lower. However, we have the capacity to increase. The countries mentioned are those that we want our standard to be on par with. We want Malaysian to earn well and the same time increase our productivity,” Subramaniam told newsmen after presenting certificates to graduates of the Astro Broadcast Traineeship programme in Seri Kembangan here yesterday.

Last month, Subramaniam had revealed that the proposed minimum wage of between RM800 and RM1,000 would be brought to the Cabinet for approval.

The announcement is expected to affect an estimated 3.2 million workers in the private sector.

He said the wage structure was proposed after taking into account studies by the World Bank, which included factors such as the cost of living, poverty line index, median range, productivity and unemployment rate.

The new rates will have a bigger impact in Sabah as the average salary there is RM577, followed by Sarawak, at RM758. In the peninsula, the average minimum wage is RM1,131.

The varying average salaries between Sabah and Sarawak and the peninsula may see different minimum rates among the three groups.

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