Wednesday, January 2, 2013

Happy Belated New Year! And Welcome To The Minimum Wage

I’ve been on an extended break from blogging, what the holidays and all, and just as importantly, from a lack of issues to really talk about.

But I suspect that will change this year, as we get closer to the deadline for the general election and all that entails.

In the meantime, Malaysia’s minimum wage regulation came into effect on the 1st, and it’ll be interesting to see what kind of impact it really has – there’s been a bevy of companies, largely smaller SMEs who’ve already been granted exemptions until the middle of the year.

Inflation? Unemployment? We’re about to find out. I suspect any effect would be minor in aggregate, though no less real to the ones most affected. For the academics out there, here’s a prime opportunity for research grants a couple of years down the road.


  1. I don't know... Call me a skeptic, but I think the issue will be one of enforcement. Historically, that has been the bane of pretty much any policy implementation.

  2. Since you are running out of issues to talk about perhaps you could share us your view on the My First Home scheme under Cagamas.

    Are we exposed to sub-prime default crisis in the future?

    I don't see the wisdom of assisting those who are new to the workforce to load themselves up with debt before knowing how adept they are at handling their finances.

    1. MCA Robber Barons in First Home PlanJanuary 6, 2013 at 5:54 PM

      Interesting point you brought up here. Another way to rob the banks by
      Chinese developers. There are many ways for financiers to enrich themselves as happened in the US. One easy method is to label their risky debts under social obligations. 40 years loan, low margin etc. Who benefit from these easy first home loan? Where does the money from the banks ended up in? The Chinese property developers! Thats where!
      Using the NST to drum up false pictures of first home benefits, the banks are made to give out money to the property developers.
      What happen after that? That is none of the developers business. They are all laughing to the bank. This scheme is nothing more than robbing the banks at the taxpayers who one day will have to recapitalise the banks.

      How to get money from the banks? Scheme it as helping the young people with the help of NST. The truth is at present day salary these young people cannot afford a 400k house. Nobody can.
      UMNO gila kah? how much you must earn to pay for 400K house? Land are plentiful, do not give in to Chinese developers by rising the limit to 400K. Gila!!

      Cagamas is the taxpayers money so nobody would notice. What is Bank Negara doing?

    2. Cagamas does not use "taxpayers" money - funding is through Cagamas debt issuance, not from the government.

  3. feedback is that the min wages would benefit foreigner the most as not many local were below 900, some cut down the various allowance and this impact on the local that earn 900 above, I dun know can u blame the capitalist that find ways to compensate the increase labour cost, example 100 foreign worker 550 basic are now at 900 ie 350 x 100 x 12 = 420k annum, who imply to the management team you get back the 420k or u get a less bonus.

    mnc n service industry dun face much issue as most were quite close to 900, just an increment of 10%-15%, a 2 – 3 fold of the usual 5% will do. the smi ‘suffer’ the most as on average they need to absorb a further 40%-60% increase. I dun know how many could shift the additional cost to their cust ie mnc or like I said, let the local to bear the additional cost.

    or as shitong wrote, what sort of enforcement could ensure the owner/shareholder to share the burden and not let the salary earner to combat among themselves by telling, ok, for the sake of patriotism, we r fine with the new budget that make 20% less for the next 5 years.

    1. @Shihong & HuaYong,

      Actually, thinking about it, I don't think enforcement will be that great in issue. At the minimum wage salary level, all companies must already provide compulsory employee contributions to SOCSO as well as report to LHDN for income tax deduction eligibility. In other words there's already an enforcement mechanism in place and they don't have to reinvent the wheel.

  4. hisham, i think most co have no prob to comply with the minimum basic of 900 since it is now a law, however they will find ways to cut down all sort of allowance / incentive / levy / bonus / medical / overtime. i am not that sure if there is much changes of the take home pay particularly among the local worker.

    i believe we just move from a low basic high incentive model into a higher basic lower incentice model, anything change? i again not that sure. i am interesting to find out how this impact on productivity, and would we cut down the number of foreign worker.

    1. There will be some changes - a higher basic matters for the employee especially for job mobility, even if actual take-home doesn't change much.

      Second is that from my understanding, the minimum wage regulation does take into account non-wage remuneration, so there's actually not much scope for companies to shift worker compensation from one category to another. In all likelihood, there will be a real (if minor) increase in real take home pay for those affected.

      As for productivity or the appetite for foreign workers, the answers will probably be no and no.