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6.3 Minimum wage policy in Malaysia: its potential impacts and suggested strategies
The comparative analysis of salary scale with Singapore has strongly indicated the
potential impact of minimum wage in producing higher quality products. It will encourage workers
to have higher productivity if it is implemented with proper training programs and effective quality
control.
It is also for the purpose of social justice, so that firms which gain profits from the
production will have more equal share with the workers who contribute to the success of the firms.
Without these workers, a firm can never achieve what they have aimed for. Lower level of poverty
will also reduce social problems. A better welfare system can promote the sense of belonging and
job security of workers.
Apart from that, minimum wage can be used as a stepping stone to transform the SMEs
into blue ocean strategies, focusing on quality products through semi-skilled or skilled workers.
As a member of ASEAN, which will implement the agreement of ASEAN Economic Community
in 2015, there will be less protection on trade among the members. Definitely, competition will be
more intense in the international market. SMEs will face more intense competition from
neighboring countries. Thus, we can no longer relied on low cost products as our competition
advantage but to move on to higher quality product.
World Bank (2012) states that the brain drain could hurt Malaysia’s ambition to become a
highincome economy by 2020. Malaysia’s secondary school leavers who work in Singapore
contribute significantly to the GDP in Singapore yet Singapore’s government does not need to bear
any educational costs and other social costs to the primary and secondary school system of these
workers. They reap the benefits of having semi-skilled workers who can be easily trained in high
technology industry. Hence, minimum wage serves as a basic scheme for firms to be competitive
in the long run by retaining more secondary school leavers. This labor force has a great potential
to be transformed by firms as semi-skilled workers with technical expertise. There are still a huge
number of secondary schools leavers available in Malaysia who receive the same form of education
system, have similar knowledge and language skills, if they are given the opportunity to be
involved in high technology products, it will bring huge benefits to the country as a whole.
In addition, firms should also consider the arrangement of intrinsic rewards as it is
impactful if well implemented, such as tapping into the issues of job satisfaction, self-esteem, more
empowerment in the work place etc. One of the reasons of successful manufacturing system in
Japan is by using quality circle where workers form small groups and they are free to discuss about
problem solving methods or more productive ideas.
With minimum wage policy together with other strategic planning, sectors which are
heavily rely on foreign workers can reduce their dependencies on foreign workers. Currently there
are 1.6 million foreign workers in Malaysia, which consist of Indonesian (48.5%), Nepal (17.7%),
Myanmar (8.7%) & Bangladesh (8.7%). The industries which recruit foreign workers include
manufacturing (37.7%), plantations (19.4%), construction (17.9%) & agriculture (9.1%). The
reasons of using foreign workers are because they can cope with long hours and tough jobs (Sin
Chew Jit Poh, July 2013). However, research also reveals that firms which recruit foreign workers
are less willing to conduct training programs. Apart from that, the productivity of foreign workers
is lower compare to domestic workers.
According to the Deputy Minister of Women, Family & Community, with 1% increase in
the domestic workers, productivity can be increased to 1.11% whereas productivity for foreign
workers only increase 0.13% , this is due to the higher educational level of domestic workers (Sin
Chew Jit Poh, July 2013). No doubt, foreign workers have given huge contributions to the
development of this nation, but firms which suffer for declining competitive advantage have to
considerate using more semi-skilled labor to ensure sustainability and growth in the global market.
Innovation can be the key for firms to be outstanding.

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Minimum wages

  • 1. 6.3 Minimum wage policy in Malaysia: its potential impacts and suggested strategies The comparative analysis of salary scale with Singapore has strongly indicated the potential impact of minimum wage in producing higher quality products. It will encourage workers to have higher productivity if it is implemented with proper training programs and effective quality control. It is also for the purpose of social justice, so that firms which gain profits from the production will have more equal share with the workers who contribute to the success of the firms. Without these workers, a firm can never achieve what they have aimed for. Lower level of poverty will also reduce social problems. A better welfare system can promote the sense of belonging and job security of workers. Apart from that, minimum wage can be used as a stepping stone to transform the SMEs into blue ocean strategies, focusing on quality products through semi-skilled or skilled workers. As a member of ASEAN, which will implement the agreement of ASEAN Economic Community in 2015, there will be less protection on trade among the members. Definitely, competition will be more intense in the international market. SMEs will face more intense competition from neighboring countries. Thus, we can no longer relied on low cost products as our competition advantage but to move on to higher quality product. World Bank (2012) states that the brain drain could hurt Malaysia’s ambition to become a highincome economy by 2020. Malaysia’s secondary school leavers who work in Singapore contribute significantly to the GDP in Singapore yet Singapore’s government does not need to bear any educational costs and other social costs to the primary and secondary school system of these workers. They reap the benefits of having semi-skilled workers who can be easily trained in high technology industry. Hence, minimum wage serves as a basic scheme for firms to be competitive in the long run by retaining more secondary school leavers. This labor force has a great potential to be transformed by firms as semi-skilled workers with technical expertise. There are still a huge number of secondary schools leavers available in Malaysia who receive the same form of education system, have similar knowledge and language skills, if they are given the opportunity to be involved in high technology products, it will bring huge benefits to the country as a whole. In addition, firms should also consider the arrangement of intrinsic rewards as it is impactful if well implemented, such as tapping into the issues of job satisfaction, self-esteem, more empowerment in the work place etc. One of the reasons of successful manufacturing system in Japan is by using quality circle where workers form small groups and they are free to discuss about problem solving methods or more productive ideas. With minimum wage policy together with other strategic planning, sectors which are heavily rely on foreign workers can reduce their dependencies on foreign workers. Currently there are 1.6 million foreign workers in Malaysia, which consist of Indonesian (48.5%), Nepal (17.7%), Myanmar (8.7%) & Bangladesh (8.7%). The industries which recruit foreign workers include manufacturing (37.7%), plantations (19.4%), construction (17.9%) & agriculture (9.1%). The reasons of using foreign workers are because they can cope with long hours and tough jobs (Sin Chew Jit Poh, July 2013). However, research also reveals that firms which recruit foreign workers
  • 2. are less willing to conduct training programs. Apart from that, the productivity of foreign workers is lower compare to domestic workers. According to the Deputy Minister of Women, Family & Community, with 1% increase in the domestic workers, productivity can be increased to 1.11% whereas productivity for foreign workers only increase 0.13% , this is due to the higher educational level of domestic workers (Sin Chew Jit Poh, July 2013). No doubt, foreign workers have given huge contributions to the development of this nation, but firms which suffer for declining competitive advantage have to considerate using more semi-skilled labor to ensure sustainability and growth in the global market. Innovation can be the key for firms to be outstanding.