TA Sector Research

Malaysian Economy - Wage Reforms to Address Wealth Inequality & Structural Defects

Publish date: Thu, 22 Feb 2024, 11:23 AM


People often get confused between a living wage and minimum wage. In summary, a minimum wage is the required wage to be paid, which is enforced by Law. A living wage, on the other hand, is the wage that is sufficient to afford a decent minimum living standard. We visited National Wage Consultative Council (NWCC) or Majlis Perundingan Gaji Negara (MPGN) recently to get further insights on this issue. Using the formula of minimum wage with variables in 2022, the minimum wage should be at RM3,090. That is way above the actual minimum wage of RM1,500. However, increasing the rate is not a straightforward undertaking as it involves Cabinet and several parties, and not necessarily every 2 years as we initially thought. Further, we are lagging behind our regional peers as most have adjusted upwards respective minimum wage in line with rising inflation. The last adjustment in Malaysia’s minimum wage was in 2022.

The introduction of the progressive wages policy (PWP) emerges as a crucial complementary initiative to the minimum wage policy and is estimated to add about RM3.3bn to the GDP. However, we doubt that the full impact can be seen this year as it is still under a pilot project and on a voluntarily basis. With modest income growth and cautious spending behaviour, we forecast a decent private consumption growth of 6.2% YoY this year.

The Visit

  • On January 30, 2024, our meeting with the National Wage Consultative Council (NWCC) was dedicated to a comprehensive exploration of the Minimum Wage Programme (MWP) and the Wage Progressive Model (WPM). Despite our intention to cover both aspects, the focus of our discussion gravitated towards the existing minimum wage. The meeting was chaired by YBhg. Prof. Emeritus Tan Sri Anuwar bin Ali.
  • In essence, the NWCC is a leader in formulating salary and minimum wage policies. The NWCC also administers and implements all matters and executes any decisions regarding salary and minimum wage policies efficiently as determined by the NWCC.
  • The Council consists of the following members appointed by the Minister through notification in the Gazette. The total membership of the Council shall not exceed 29 individuals at any given time.

Source: TA Research - 22 Feb 2024

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