PETALING JAYA: There is no better approach to economic well-being than paying workers better wages, say economists.
Universiti Utara Malaysia professor of economics Dr K. Kuperan Viswanathan said the government should have implemented the minimum wage of RM1,500 in 2020 and that the current minimum wage should be RM2,000.
“The cost of living has increased significantly and inflation is real and is above 5%,” he told theSun.
Kuperan added that any increase in minimum wage would benefit the lower income groups, especially the B40.
He was commenting on a recent announcement by Prime Minister Datuk Seri Ismail Sabri Yaakob that the government will implement the RM1,500 minimum wage nationwide beginning May 1.
“A higher minimum wage will immediately increase the income of workers. Up to 200,000 workers, or close to 40% of low income earners, will benefit from the increase. This is a substantial group and it would have a positive impact on the economy through spending and consumption.”
Kuperan also said that there was overwhelming evidence that an increase in minimum wage was not the main cause of inflation.
He said an increase in minimum wage results in an improvement in the welfare of workers who are in need of higher earnings, and the move helps to distribute income equitably.
“An increase in the earnings of the lower income category of workers would help the nation to increase consumption and add to overall economic growth. The government can manage inflation by monitoring its causes and taking the necessary steps to mitigate it,” he said.
“For example, if inflation is due to costs or what economists call ‘cost push inflation’, the government could look at the constraints that contribute to it, such as input costs or import-driven costs. If inflation is due to demand pull factors, the government could help by finding ways to reduce demand and encourage consumers to reduce consumption in certain sectors to reduce the pressure on inflation,” he added.
“If inflation is due to hoarding or factors that reduce competition in the market, the government can take action to improve the competitive environment and encourage more producers to enter the market to supply more goods and services.”
Kuperan said the take-home message is that an increase in minimum wage is required and it is the best way to enable social justice and economic growth simultaneously.
Meanwhile, Universiti Malaya professor of Economics Datuk Dr Rajah Rasiah said since minimum wage refers to remuneration needed to support essential consumption, it makes sense as the cost of essential items, including food and fuel, has risen quite a bit.
“In other words, the real income of those relying on minimum wage should be similar to the RM1,200 fixed following the rise. All arguments on productivity not keeping pace with wage rise does not hold as minimum wage is not performance-based wage,” he pointed out, adding that workers currently earning more than RM1,500 a month may not benefit from the rise.
“If the amount dispensed is big enough, it could add to inflation of essential goods prices in the short run as supply is unlikely to respond so quickly to rising demand. The big problem is enforcement and efforts to prevent profiteers seeking to raise prices to take advantage of a wage increase,” he said.
“I do not expect that rise to make a serious dent on inflation as the formal income groups involved are not very large. Perhaps the government should apply the same rule to all workers, including informal workers, to better ensure that some workers are not discriminated against unfairly.”
Malaysian Trades Union Congress (MTUC) acting president Mohd Effendy Abdul Ghani said the minimum wage is in line with MTUC’s claims and other claims such as the cost-of-living adjustment (Cola) allowance.
“Apart from minimum wage, MTUC’s other claim from the government is a Cola payment of RM300 per month to employees in the private sector.”
He added that the minimum wage needs to be implemented more holistically and there was no need for conditions that burden workers.
“The cost of living is rising and if this implementation is introduced to certain industrial sectors and only according to cities and towns as with the previous implementation, then it would put pressure on workers (who are trying) to survive, especially the B40 group.
“When the cost of goods rises, it will happen in all corners, regardless of whether it is in the village or city.”
