Pay and politics
Minimum wage jumps in Malaysia as election draws nearer, and other countries are also facing big decisions on pay. By P Prem Kumar in Kuala Lumpur
For more than a decade, Thangarani Karupiah earned just 900 ringgit (US$210) a month from her job sweeping and mopping floors at a private healthcare centre near Malaysia’s capital. But since 2019, she has benefited from government rules on wage floors, which have lifted her pay by two-thirds.
She is among the 1.2 million Malaysians who gained when the minimum wage rose to 1,500 ringgit this month, from the previous levels of 1,100 or 1,200 ringgit in 57 major towns and cities. The new rate represents a windfall of 25% to 35% for the many workers who live from paycheque to paycheque.
“If there were no rules set by the government, I would still be paid 900 ringgit,” Thangarani, who has been in her job for 23 years, told Nikkei Asia.
The latest jump in the minimum wage is intended to support people suffering from economic pain inflicted first by the pandemic then exacerbated by the impact of Russia’s invasion of Ukraine. Fatter paycheques for workers, however, could erode corporate profits and investment appetites, ultimately slowing the country’s recovery, experts fear.
Many business leaders have disparaged the latest rise as “abrupt” and “disruptive”.
Besides Covid and the social restrictions it wrought, some Malaysian businesses are also trying to come back from devastating floods last December, noted Syed Hussain Syed Husman, president of the Malaysian Employers Federation.
Many experts say they detect a clear political motive behind the decision to raise the minimum wage: The government led by Prime Minister Ismail Sabri Yaakob expects general elections to take place by the end of the year.
The government, however, poohpoohs the notion of vote-buying, saying it wants to give Malaysians a leg up as they climb back economically from the pandemic.
Human Resources Minister Saravanan Murugan told Nikkei that the 1,500-ringgit minimum wage is timely and companies should have anticipated such a move as the law says the pay floor must be reviewed at least once every two years.
“Bear in mind,” he said, “that workers have been badly affected during the pandemic. Some of them had their wages cut. Others were told not to come to work or had their hours reduced, which affected their salaries.”
The median monthly salary in 2020 dropped 13% to 1,894 ringgit from 2,185 ringgit in 2019, according to Human Resources Ministry data. “The increase in the minimum wage is expected to restabilise the wages” of workers at the bottom of the pay scale, Saravanan added.
Malaysia’s central bank has warned that the minimum wage policy should be implemented in an orderly fashion so that it supports growth and does not add to inflationary pressures.
“The implementation of the minimum wage increase would need to account for the uneven recovery across industries,” governor Nor Shamsiah Mohd Yunus said recently.
“We should give some time for affected firms to adjust. [Toward this end], the phased approach as announced by the government would help.”
She also voiced worries, however, that over time the phased approach could distort the job market by incentivising workers to change jobs for higher pay.
Wage growth in Malaysia has been slower than in other Asian nations over the past 10 years. The average wage at factories of Japanese-owned companies has risen more slowly in Malaysia than elsewhere in Southeast Asia. This is partly because Malaysian wages are relatively high compared to other emerging economies such as Vietnam.
In Indonesia, Jakarta Governor Anies Baswedan on Jan 1 raised the capital’s minimum monthly wage by 5% to 4.6 million rupiah ($320), almost five times the national average of 1.1% set by the Ministry of Manpower.
Some critics suspect the big increase is a ploy to help Baswedan realise his presidential ambitions.
“Do business owners see [Jakarta’s hike] related to a political interest? Obviously,” said Adi Mahfudz Wuhadji, deputy chairman for manpower at the Indonesian Chamber of Commerce and Industry.
In a poll conducted in February by Saiful Mujani Research and Consulting, Baswedan was the second-most-popular potential candidate among those listed.
President Joko Widodo also dished out a huge minimum wage hike when he was Jakarta governor, in 2013. Amid widespread labour rallies and strikes, he announced a 44% minimum wage increase, to 2.2 million rupiah. He ran for the presidency the following year, trumpeting happier paydays during his successful campaign.
Across Southeast Asia, politicians are struggling to find common ground between workers, who desperately need more pay, and business owners, who prefer not to tinker with market forces.
Singapore is going its own way. It does not officially have a blanket minimum covering all sectors. Instead, the government sets base pay amounts for specific, typically low-salaried jobs like cleaners and security guards. It also uses what it calls a “progressive wage model”, which allows minimum earnings to rise as a worker undergoes skills training, takes on more responsibilities or otherwise performs at a higher level.
Over the next two years, the policy will be gradually extended to cover more low-paying sectors like retail and
“Our overarching principle continues to be that wages and productivity should rise in tandem”
ZAQY MOHAMAD Singapore senior minister of state for manpower
food services.
“Our overarching principle continues to be that wages and productivity should rise in tandem,” Zaqy Mohamad, the senior minister of state for manpower, told parliament in March.
In Indonesia, the government last month announced a “wage subsidy” in response to rising prices. The one-off handout of 1 million rupiah ($68) will go to 8.8 million workers who earn less than 3.5 million rupiah a month.
Labour unions ridiculed the cash payments. “We call them a bribe, meant to make people stop criticising the many bad government policies these days,” said Nining Elitos, chairwoman of the Indonesian labour Union Alliance Congress.
“The government should provide welfare to the people through income certainty,” she told Nikkei. “Regarding wages, the government should control and intervene in the market, otherwise there will be a ruckus every year.”
Single-party Vietnam plans to raise its minimum wage by 6% in July. It will be the first such hike in two years. “The increase is not high, but it [is in harmony with] the will of employees and employers,” said Le Van Thanh, deputy minister of labour.
Thailand, meanwhile, is planning to raise its minimum wage in September to “an appropriate sum” in line with the recovering economy. Workers and employers have vastly different views on what is appropriate, though.
Labour groups are pushing for a new uniform rate of 492 baht a day across the country, which would be an increase of 47% from the high end of the current range, which is 313 to 336 baht depending on the province.
Analysts and businesses argue that the timing might not be right for a minimum wage hike, let alone an increase as large as the one labour groups are seeking, as the economy has not fully recovered from the pandemic.
“The employment rate has not yet recovered,” said Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry. “And unemployment remains high. It might not be the right time to raise the minimum wage, at least not too much.”