Minimum wage and Malaysia's Labour Market

The local labour market employs about 12,7 mio. people, of which up to 3.5 mio. are expected to be in the low-wage group. This group would benefit from the newly introduced minimum wage (Dept. of Statistics Malaysia Feb. 2012). For investors it might be interesting that educated workforce is available, but there seem to be some downsides. Approximately 25 % of the population from 18-24 pursue college or university degrees. There is criticism that the quality of degree holders is low and the government is not preventing a general brain drain, but similar discussion happen globally. At least 20 % of the total population still speaks English, which usually makes it easier to found a company in Malaysia than e.g. in Indonesia. (Crystal, David 2005: The Cambridge Encyclopedia of the English Language). The distribution of the workforce shifted already to the service sector (pie chart), as professional services, logistics, accommodation and especially the tourism industry are growing rapidly.

Employment in Malaysia 2011

In this context, I also would like to point at extensive human resources services, such as job search websites (jobstreet.com.my or jobsdb.com.my) and international HR service agencies (Michael Page International, Kelly Services etc.). Jobstreet is a leading local player with an internet platform and also provides information on average salaries for different positions and sectors, while the bigger international corporations offer complete market reports and executive search services. Finding staff in a new market is usually challenging, but can be managed due to the highly developed service sector.

Coming back from the short excursion on market entry issues, we dive right into the minimum wage policy.

While Malaysia with 3,2 % is not suffering from a high unemployment rate, the wage issue as well as the number of people living in poverty is highly political. (The Star 6 May 2012: MTUC tells employers not to kick up a fuss over min. wage rate) As the government announced in the beginning of last week, the new wage policy would offer workers in West Malaysia at least RM 900 (approx. USD 295) and RM 800 in East Malaysia (approx. USD 265). This difference between east and west certainly caused some irritation. On the one hand, the move of the UMNO led government reaches the minds and pockets of low-income groups in times of an upcoming election. On the other hand, it seems as if the implementation will take another 6 months after it was gazetted, also to allow corporations to adapt. SMEs and Micro – SMEs will be given up to 12 months. 

Major opinion leaders from unions, industry organisations and politics did not make surprising statements. It is worth mentioning that foreign workers are excluded from this policy, as otherwise certain industries such as the Malaysian construction business might go bankrupt (about 90 % of foreign workers). Analysts expect that agriculture and manufacturing industries will be most affected, which employ as much as 90 % of low-wage labour. However, the agricultural sector consists of many small businesses, which are based on self-employment and therefore not to be included in this policy. (The Star 5 May 2012: Minimum wage will structurally alter low-cost industries)

In my next post, I will offer a few quotes from local opinion leaders, which should present the overall degree of acceptance in the market. 

Stay tuned!