According to the secretariat of the National Wages Consultative Council, minimum wages is defined as ‘basic wages’ to be as determined under the Act. It is stated that employees’ wages must reach the minimum amount of RM900 per month. This Act will be implemented next year.
Price
floor is imposed by government that makes it illegal to trade at a price lower
than a specified level. When a price floor is applied to labor markets, it is
called a minimum wage. This is to take care of welfare of people in the
society. If the price floor on a market is set below the equilibrium price,
there would be no effect because the price floor does not constraint the market
forces. The market would work as if there were no minimum wage. If the price
floor is set above the equilibrium price, it has powerful effects because there
would be conflicts between the law and market forces. Prime Minister Datuk Seri
Najib Razak has stated that companies must embrace minimum wage as a strategy
and an opportunity to revitalize their businesses. Workers or employees have
been eagerly awaited piece of legislation as they have cherished a hope for a
higher income. On the other hand, employers are concerned that it might
increase the cost of production so that their businesses may not be viable
anymore.
For
each of us, the labor market is the market that will influence the jobs we get
and the wages we earn. For example, we assume that companies are the employers
and they decide how much labor to demand. The lower the wage rate, the greater
the quantity of labor demanded. Conversely, households decide how much labor to
supply. The higher the wage rate, the greater the quantity of labor supplied. The
law of demand states that while other things remaining the same, the higher the
price of a good, the smaller is the quantity demanded and the lower the price
of a good, the larger is the quantity demanded. Changes of price would only affect
the movement along the curve. In this instance, Employees can negotiate with
employers or labor unions might turn to governments for a higher wage rate.
In
illustration of figure 1.1, wages paid by employers to employees cannot go
lower than the minimum wage which is 9 dollars. Employers are not allowed to
pay anything under the price floor. The area under the minimum wage is called
illegal region which is no government policies occur in that region. At the
minimum wage of 9 dollars per hour, 20 million hours are hired but 22 million
hours are available. Point A to point B is the unemployment. If the rate of
unemployment is high, so do the rate of crime in Malaysia.
According to the Star news, one of the
reasons why market forces have not worked is the presence of millions of
foreign workers. Malaysia perhaps is the only country that made it extremely
difficult for knowledgeable workers to work here but has welcomed millions of
low-wage and unskilled workers. This has suppressed wages as Malaysian workers
have to compete for low wages.
Additionally, is the competitive market
efficient? Markets do not always achieve an efficient outcome. Market failure happens
if too little of an item is produced which is underproduction and if too much
of an item is produced we called it as overproduction. The real reason why
Malaysian’s productivity is low is not because of workers are not productive.
It is due to the fact that employers have been successful in suppressing labor
wages. Furthermore, there is no incentive or allowances to be paid to employees
and no investment in research for productivity improvement.
If the construction workers who still use
hand-assembled timber formwork to construct flyovers or the toll operator who
manually hand out tickets, how do they increase the output? Employers would not
waste their money to invest in machinery because it is more profitable to
employ cheap labor and this can reduce their cost of production. For example,
two women in their sixties in Incheon Airport in Korea can manage the luggage
trolleys, while in KLIA we have an army of Bangladesh. This is definitely not
because of women in Korea eat a lots of ginseng but they have a machine that
collects trolleys magnetically and tows them along.
A minimum wage will not hurt Malaysia’s
competitiveness. According to the Star news, our competitors in 1980s, Taiwan,
Korea and even Hong Kong, have minimum wage systems while in Singapore, the
head of trade union movement is a government minister and hence the country is
able to implement an inclusive wage policy that has a wage level of more than
three times higher than Malaysia and productivity growth has transcend us.
In order to be a high-income nation,
government of Malaysia has to be serious and change the policies of being a
low-wage country and restructure employment to create productive jobs to decrease
the number of unemployment. This will benefit the country with higher wages and
lead to a higher purchasing power of consumers that will increase domestic
demand and more businesses for local companies.
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