Friday, May 4, 2012

A Foreign Perspective On The Minimum Wage

On the Beeb:

Concern from Asian businesses over minimum wage

Many countries across the globe are celebrating International Workers' Day on 1 May.

In many parts of Asia, governments, workers and unions are using the day to ask what is a fair day's wage for a fair day's work?

Malaysia has just announced its first minimum wage for private sector workers. Thailand, China and Indonesia are also mulling minimum wage plans.

But whilst this is good news for workers, there are fears that a compulsory minimum wage could lead to Asia losing its competitive edge.

Rahul Bajoria, an economist at Barclays Capital explained the motivation behind Malaysia's wage initiative to the BBC's Rico Hizon.

The video can’t be embedded, so hit the link above to view the interview. Here’s a couple more article links from the BBC:

  1. Malaysia introduces minimum wage for the first time
  2. Malaysian business' labour dilemma


  1. Precious, they had to go and ask an indian restaurant operator of all places...the bbc reporting quality is pretty dismal and biased, no wonder bbc journalists are flocking to al jazeera...

  2. There are few relevant points from that interview. Somehow, the implementation of minimum wage will, inevitably, increase the cost because Malaysia relies to foreign workers too much. However,that is the main purpose of the implementation minimum wage in Malaysia. So that we won`t rely on cheap labour and moves to capital intensive. I guess all they want is to make Malaysian government look bad that's all. More on political agenda and rather than the welfare of the citizen.

  3. Ironically, several months back cnn made a mini documentary about a hard disk manufacturer that supplies to WD on how malaysian manufacturers abuse lowly paid foreigners and they wen interviewin dumb americans whther theyd buy WD proeucts if they knew.....itu pun salah

    Now malaysia have minimum wage....the fat mandur at indians restaurants also sad cannor make money coz no banglas or indians to exploit to stir his stale curry..pun salah

  4. Salam,

    BNM estimates inflation rate to remain 2-3% despite implementation of minimum wage which make sense and totally reasonable. However some fellow ask me why when we always predict lower inflation yet our consumer prices continues to skyrocket. I had no evidence whatsoever on whether or not this claim is true. However many believed to be so. Perhaps you could explain on this issues

  5. @Akubas86

    It depends on which consumer prices you're looking at. If you're talking about clothing for instance, prices have been stagnant for a decade. What people are mostly likely feeling are the increase in food prices (you have to eat everyday). And within that limited category, it's really only meat and seafood that have been zooming up. But if you factor in food as a portion of the overall household budget, you'll get a far lower number than "skyrocketing". Also, house prices are not included in the CPI (only rent is), so there's a disconnect between inflation (what we consume) and cost of living (which also includes asset purchases).

  6. Hishamh,

    I guess when layman says that cost of living increases it is most probably in association with household budget. I guess many perceived that at today rate's we can only bought fewer item than before. I assume when you say 'far lower than skyrocketing' what you meant; that there is some increment yet it is not substantial. Lastly, rent increment is understandable, the way I see it, as housing prices goes up so does rent...

  7. @Akubas86,

    Let's say food comprises between 30% to 40% of a monthly household budget (the actual weight in the CPI is a little over 30%). Out of that, say 10%-15% (i.e. 3%-6% of the total) is actually spent on proteins (fish, beef, chicken etc). The rest of the food items tend to be volatile but average prices haven't increased as much.

    If prices of proteins are increasing 10% in price every year (which is what happened last year), you get an increase in CPI inflation of just 0.3%-0.6%.

    Obviously, if you spend more on food, your "personal" rate of inflation will be higher. So the official rate will tend to understate the rate of inflation for lower income groups (who spend more on food in percentage terms), but overstate it for higher income groups.

    As far as rent is concerned, no, it hasn't gone up very much. For example, rentals in my area have been pretty flat for the last few years, but house prices have zoomed. They are not necessarily related.