Minimum Wage in Malaysia

Minimum mesh in Malaysia lack for it and its attainable centeriveness 1. 0. Introduction Background Infor matteion There has been growing debates concerning the tokenish remuneration in Malaysia, with strong opinions from both sides of the arguments. In 1979 edition of their front text edition, William B. Aumol and Alan Blinder explained, The primary consequence of the minimal pay law is non an adjoin in the incomes of the least skilled workers but a travail of their employment opportunities (p. 7). On the other side of the debate, social dressivists, insurance policymakers and other non-economists practically argue for an increase in the marginal salary. Advocates of the nominal rent necessitate included Franklin D. Roosevelt, Martin Luther King, A. Philip Randolph, Walter R. Reuther, Edward Filene, Beatrice and Sydney Webb. Finally, Malaysia took its stance and made its showtime legislative attempt at putting in place a national token(prenominal) pay on twen ty first June 2011 .Introduced by Human Resources Deputy Minister, Maznah Mazlan in Parliament, the National Wages Consultative Council (NWCC) bill was tabled for its first reading. Most signifi freightertly, the oecumenical public does non widely shargon the negative opinion of the stripped enlist, according to pots. What questions us, is whether thither is a need for token(prenominal) betroth, and if in that location, how effective it dexterity be. Statement of the Problem This paper go forth investigate on the need and the effectiveness of the yet to be borderline wage bill among certification guards, cleaners with its current value of RM720.The idea of having a national minimal wage in Malaysia has been proposed much than 12 socio-economic classs ago by the Malayan Trades Union Congress (MTUC), when Tun Mahatir was unagitated the Prime Minister, and has been continuously rejected, until more recently, the current prime minister, Datuk Seri Najib has earthd in the Malaysia Bud motor 2011 speech occupancyes moldiness embrace the negligible wage as a business dodging. A lower limit wage theoretically, is planned to affect the low-skilled workers much(prenominal) as janitors, cleaners and credentials, who ar paid with low wages which affect their standards of living.With a tokenish wage in effect, they were supposed to be able to remonstrate their standards of living and live a more prospering life. Conversely, Orrenius and Zavodny (2008) and Ragayah Haji mat Zin(2007) argue that the effect of a lower limit wage whitethorn safe put these low skilled workers out of employment be motion of economic conditions in nation, putting the low-skilled workers in an even worse note unemployment. Research mapThis paper aims to investigate whether or not Malaysia is in need for effectuation of a national minimum wage, found on the reviews of recent developments in the literature pertaining to the overall do of a minimum wage, and the opi nions of the janitors, cleaners and security guards. The focus is on the perceptions of low-paid workers as menti wholenessd earlier and their satis faction with the amount they ar being paid and whether or not it covered their day to day disbursements.Analysis can be made on whether or not these workers were exploited by the absence of a minimum wage and that a minimum wage is indeed can block such built in beds. To do the questions follows will be d unrivaled and literature review will be made that will analyze on how atomic number 18 salaries are establish and later on the consequences of put throughing the minimum wage. This paper aims to answer the following questions 1)Is there any need for Malaysia to implement national minimum wage? 2) As for this instant are low-paid workers are paid enough to cover their casual expenses? )Does the law bring a tangible change? Significance of the get wind There are lots of studies pertaining to the release of minimum wage alm ost the globe, however, only few had focused on the issue being practise in Malaysia, like Rohayu Abd. Ghani in her article Salary and Wages in Malaysia and David Lim in his article Sweet Labor and Wages in Malayan Manufacturing . Referring to the history of analytic thinking, both(prenominal) suck up focused on evolution countries that stand already implement the minimum wage, like P.Jones, where he discusses issues pertaining gold coast or first world countries, like M. Bowey and A. Lupton where comprehensive explanation about performance in United Kingdom was done or D. Neumark and W. Wascher analyzing the situation in USA. This brings us to the conclusion that more studies need to be done to go on out the conditions of so-called black workers janitors, cleaners and security guards in Malaysia. Ironically, many another(prenominal) an(prenominal) newspaper articles choose addressed the economic conditions in Malaysia, the effect of those on citizens of Malaysia.But n ever the question of implementing the minimum wage policy was taken any further. Findings of the investigation will be helpful in find if the minimum wage needs to be utilize, to analyze whether it would be rattling successful in improving the lives of janitors, cleaners and security guards, and whether or not their current salaries will be sufficient for them to live a comfortable life, as concerning this issue Shireen (1998) has shown that poverty in Malaysia officially seen s as a situation of relative rather than absolute deprivation.By intelligence their conditions, a better decision of how the minimum wage could be implemented can be recommended and the proximity of the issue can be understood. 2. literary works review Bowey and Lupton (1982) has discussed that wage and compensation administration is complex and subtle, and littered with techniques designed to reduce the complexity for the administrator and cope with the subtleties. The explanations that are brought tog ether are the descriptions of the most important techniques that are available for coping with the principal tasks of wage and salary administration, and shows how and when these may be used.They propagate that there are many systems of getment which attempt to relate earnings to the work done and earlier any such system can be used it is requisite to assess that work in some way by compare the nature of the work (eg. Is it heavy work? Does it carry a turgid amount of responsibility? ), it may as well as involve assessing the rate at which the employees are works and rewarding them according to their different rates of performance. The first method is line of credit evaluation while latter is work measurement.Regarding this guinea pig they outline that Job evaluation and work measurement are ii subjective areas which are of crucial importance to the operative and the manager as they radically affect the payback and the quality of work ( Bowey & Lupton, 1982, p. 159). And he re is the issue that we have, why is that in some instances, wage amounts differ, regarding the fact that its one country, one sector of work, but yet, some workers are abused and get to be paid a very low salary. The inform us that there are three different makeation while salary is being allocated to each job.First, the mechanics of assigning different amount of funds to different positions is the job hierarchy and different standards of performance. Second, consideration of the absolute levels of pay which should be given when pay in other organizations is taken into account. Third, the touch on of negotiation amid the worry and the union about levels of payment. And exactly the tercet consideration step ups to be quite an issue. Why is that we require the workers to give the barely amount of performance, finishing the assigned work, but we arent just in giving enough reward for the effort contributed.It appears, that using the power as an upper- manager who hires, the ab undance of work supplying the market, especially with the flow of under-the-counter immigrants, workers will have to agree on terms offered. Do we consider the undue influence and abuse of situation as an ethical act? Bowey & Lupton(1982) stated that With management by objectives, the employee and his superior agree a influence of objectives for the coming year, and the individual is given salary increase at the end of the year, which is partly determined by how well he has succeeded in achieving those targets (p. ) Theoretically, the wage systems seems just fine. Unfortunately, this is not the grapheme in Malaysia. Plantation workers are initially paid RM350 and can achieve RM700 with bonuses. Would that be enough for an average Malaysian citizen to cover rent, food expenses? They argue that If we give equal rations to everyone, who do we manoeuvre to carry out the most onerous tasks-and on what basis do we make this choice? ( Bowey & Lupton, 1982, p. 159).In the end, whether we like it or not management has to make decisions about the worth of the contribution comparing different levels of jobs and eventually assigns the salary, even if the appointed salary makes it gimcracker than in other place as starting amount of salary differs from the budget of one institution to another. journal Business Asia has analyzed the ambivalent attitude of government to strange parturiency. earlier the crisis 2. 5 billion immigrant workers were regarded as undesirable but necessary onus( Business Asia,2000,p. 2) . It is a very degrading attitude toward human being, be he from first world country or third, but what matters is that, in the end, we cant change much. Laws and bills are issued, but these workers still are considered cheap workers for black jobs. This type of attitude is problematic, as the accountability and dignity of an employee disappears, especially when allocating the salary. Wikipedia (2011) states that the minimum wage that Malaysia has stated for plantation workers is RM350 and that even may reach RM700 with bonusesThe article explains further Officially-orchestrated- and mostly employer-funded-repatriation programmes saw the number of registered foreign workers drop below 700,000 by end 1999, from peak of 1. 2million in 1997(Business Asia,2000,p. 12) . Though, subsequently the pressure from exasperated employers, the government announced the lifting of a freeze on the recruitment of foreign workers, but yet, the grudging nature of the concession was underlined by an accompanying list of 138 categories of job for Malaysians only (Business Asia, 2000,p. 12).And ironically, all these statement are done by those who stated an intention to transform Malaysia from a output signal to a knowledge- based economy (Business Asia, 2000, p. 12). Employers complain that Instead of encouraging the undogmatic innovators needed to help realize such a lofty ambition, the cultivation system seems expressly programmed to eliminate the m (Business Asia,2000, p. 12). All of the preceding(prenominal) had lead to the magnetic core of the issue, the rise of salary. The fear among employers is that a rise in wages will eventually begin outstripping productivity gains (Business Asia,2000, p. 2). Despite the increase of GDP by 3. 7% wages by relative modest grew by 2. 7%. The question is what should stand above, a just increase in wages, which a company can afford, or the increase of the profits at the expense of exploitation of decent workers. As Annil Netto reports at Indian-Malaysian Online The Malaysian Trades Union Congress, an umbrella for privy sector unions, threatened by nationwide strike if its gather up for a minimum would be ignored, even so, the Malaysian government gave a cool response .In March 2000 a national survey by MUTC and International Labor Organization has revealed that some 2 million workers earned less than a poverty- line income of RM600, MTUC demanded at least RM1,200, which we still do n ot have in 2011. Further, Jones (1997) examines the impact of minimum wage legislation in developing countries with incomplete reporting, using the case of Ghana. Her pro eagle-eyeded research has proved that the implementation of the minimum wage was not an streamlined policy for reducing the incidence of poverty in a situation where coverage of the minimum wage legislation is partial.The reason is that people working outside of the wage sector e. g. Farmers who survive by selling and devour their own output are not covered by the minimum wage, and they are the ones who are in need of the minimum wage. Thus, the implementation of the minimum wage becomes non-effective. Her results have shown that the minimum wage in Ghana had a negative impact on employment there were significant job redes due to the policy.Although the airfield is based on the case of Ghana, it can be deduced that if Malaysia were to implement the minimum wage, it should cover a large relation of the popul ation, and not just those working in the public sector, to increase coverage. Ghana and Malaysia are two different countries of different cultures and mentalities, government structure, though communality are the social problems that each faces. But the differences might tell us that policies implemented in one will not necessarily give the uniform results if applied in the other.The main key point that could be inserted is that the minimum wage should have a large coverage, in our research cleaners and guards. Saget (2001) examines the relationship between the level of minimum wage and employment and between the level of minimum wage and poverty through literature survey and likewise empirical evidence. The response of employment and poverty to changes in the minimum wage on more than twenty countries was tested in the research, and he data analysis had given strong maintain to the proposition that the minimum wage may bring positive results in poverty stand-in by improving th e living conditions of workers and their families. (Saget, 2001,p. 31). The literature survey however, had differing opinions, for example some papers mentioned that raising the minimum wage in developing countries may contribute to a widening of the gap between the covered and open sector, similar to Jones (2007), generating relative poverty.Unlike Jones (2007), Sagets (2001) analysis proved that minimum wage had no negative results on employment whereas Jones had shown that the minimum wage policy had caused significant job losses. This is because Jones study was focused on incomplete coverage of the minimum wage while Saget looked into the minimum wage in general, ford country to see the effects it had on poverty and employment. Therefore based on Jones study, if Malaysia were to implement the minimum wage, then up till now there would be a reduction in poverty, which is positive and one of the goals of Malaysia in becoming a high income nation by 2020.Jones did not manage to find a significant link between unemployment and the minimum wage thus, this means that a minimum wage would not cause unemployment to increase significantly. However, the results could also mean that countries that implement the minimum wage are more committed to reducing the level of poverty in the country thus leading to results which imply that setting a higher minimum wage would reduce poverty. Lo (2010) in his paper titled The case for a minimum wage in Malaysia is a highly passionate in support of the minimum wage.It is perhaps due to the fact that the writer is the writing table of the MTUC which is the very same organization that has been pushing for minimum wage legislation in Malaysia for over 12 years now. Malaysian workers suffer from suppress wages because of the influx of cheap foreign labor, but having a minimum wage according to the Malaysian Employers Federation (MEF) would hurt Malaysians competitiveness due to the increase in costs firms will have to incur.Howev er this is countered by Lo (2010), If a firm cannot even provide a decent living wage to its workers one that is enough to meet their elementary needs it has no business being in business(p. 3). He also suggested that Malaysia cant always depend on cheap foreign labor forever. Although now it would be expensive to invest in research and development to develop tools that would improve productivity, it would be cheaper in the long run to use these machines. Furthermore, higher wages lead to higher productivity. It would advertise employers to invest in research and development to increase overall productivity and efficiency.Malaysia has not been spending much on research and development, especially private sector, but this would change if there was minimum wage legislation, and more on research and development would give Malaysia a better future. According to this, Malaysia should implement the minimum wage, because of the effects it has in reducing social poverty and also its pot ential in enhancing economic issue and productivity improvements. There is a growing view among economists that the minimum wage offers substantial benefits to low-wage workers without negative effect.Although there are still dissenters, the best recent research has shown that the job loss reported in earlier analyses does not, in fact, occur when the minimum wage is increased (Fox, 2006, p. 1). Also, over 650 economists, including five Nobel Prize winners and six past presidents of the American Economic Association, recently signed a statement stating that federal and state minimum wage increases can significantly improve the lives of low-income workers and their families, without the adverse effects hat critics have claimed (EPI, 2006). Although the paper focused purely on the evidences from the USA, the effects of minimum wage are still similar if it were to be implemented in Malaysia. However, there could be major differences as Malaysia would be implementing the minimum wage f or the first time, while the USA has been doing it for much longer and their case is to do with raising the minimum wage. Malaysia would face lots of opposition in the beginning as the adjustment process would take time. eyeshade and Krueger (1995) extensively describe the effectiveness of minimum wages of each sector of US population. As stated by CIA World Factbook (2011) US GDP for year 1995 was 2. 51 and 3. 7 for year 2006, and current GDP of Malaysia is 3. 9,hence we can resolve similarities in the phase of economical development. Card and Krueger present us a new body of evidence showing that recent minimum wage increases have not had the negative employment effects predicted by the textbook model.Some of the new evidence points toward a positive effect of minimum wage on employment most show no effect at all. Moreover, a reanalysis of previous minimum wage studies finds little support for the prediction that minimum wages reduce employment, like Richard Lester during the 194 0 or Card and Krueger initial work in 1988, California state as a case study. If accepted, the findings will call into question the standard model of the labor market that has dominated economists thinking for the past half century.They have showed us the empirical findings which result in later first of all, a study of employment in the fast- food industry after the increase in New Jersey minimum wage was not affected adversely by law, stating that modest increases in the minimum wage have no adverse effect on the employment outcomes of low-wage workers (Card & Krueger, 1995, p. 114) as Lo ( 2010) and Saget (2001) had argued above. The results were gathered from four hundred restaurants. Relative to restaurants in Pennsylvania, where the minimum wage remained unchanged, they found that employment growth within New Jersey was higher at restaurants (Card & Krueger,1995, p. 46). Second, a cross-state analysis finds that the 1990 and 1991 increases in the federal minimum wage did not a ffect teenage employment adversely. Thirdly, an increase in the minimum wage leads to a situation in which workers who previously were paid different wages all ascertain the new minimum wage. Card & Krueger(1995) argue that once there is an increase in the minimum wage it would result in a peach effect, leading to pay raises for workers who previously earned wages above the new minimum. Surprisingly, increases in minimum wage do not appear to be offset by reductions in fringe benefits.Increase of such kinds has decreased the minimum dispersion, partially reversing the trend toward rising wage variety that has dominated the labor market since the early 1980s. Finally, as a fact minimum wage is a blunt instrument for reducing poverty. Its an amount that is smaller than most other federal antipoverty programs, and that can have only limited effects on the overall income distribution (Card & Krueger,1995, p. 3). They also note, that more than 60 percent of all workers have worked fo r the minimum wage at some time during their careers(Card & Krueger,1995, p. ). References Anonymous (2000). No staff, no skills, Business Asia, Vol. 32 Issue 14, p12, 4/5p Card D. , Krueger A. B. ,(1995). Myth and measurement. The new economic science of the minimum wage. Fox, L. (2006). Minimum wage trends Understanding past and contemporary research. Retrieved from http//www. epi. org/publications/ incoming/bp178/ Jones, P. (1997). The Impact of Minimum Wage Legislation in Developing Countries where reportage is Incomplete. Retrieved from http//www. bepress. com/cgi/view fill. cgi? article=1066=csae- redir=1search=jones+ghana+wage Lo, A. 2010). The case for a minimum wage. Retrieved from http//www. mtuc. org. my/andrewminimumwageaug2010. pdf M Bowey,A. , Lupton, T. (1982)Managing Salary and Wage systems,Great Britain Gower Publishing Company Retrieved from http//www. indianmalaysian. com/minimum_wage. htm Retrieved from https//www. cia. gov/depository library/publications/ html Saget, C. (2001). Poverty reduction and decent work in developing countries Do minimum wages help?. International Labour Review, 140. Retrieved from http//www. ingentaconnect. com/content/ilo/ilr/2001/00000140/00000003/art00002