• ISSN: 2301-3567 (Print), 2972-3981 (Online)
    • Abbreviated Title: J. Econ. Bus. Manag.
    • Frequency: Quarterly
    • DOI: 10.18178/JOEBM
    • Editor-in-Chief: Prof. Eunjin Hwang
    • Executive Editor: Ms. Fiona Chu
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HOME > Archive > 2015 > Volume 3 Number 1 (Jan. 2015) >
JOEBM 2015 Vol.3(1): 125-131 ISSN: 2301-3567
DOI: 10.7763/JOEBM.2015.V3.167

The Implementation of the National Minimum Wages in Malaysia

N. A. Ibrahim and R. Said

Abstract—Malaysia’s national minimum wages were announced on 30 April 2012, and are enforced in stages. The Minimum Wage Order 2012 was gazetted on 16 July, 2012 which enforce the implementation of the minimum wage rates on 1 January, 2013 for employers with more than five workers and on 1 July, 2013 for employers employing five and less workers, excluding firms that provide professional services classified under the Malaysian Standard Classification of Occupation (MASCO). Despite the fact that the real labour productivity of Malaysia grew faster at 6.7 per cent between 2000 and 2008 compared to a mere 2.6 per cent increase in average wages, many employers still object to its implementation. This paper shed more light to the concept behind a statutory minimum wage policy and its application in the case of Malaysia. Its rationale and justification are reviewed and analysed. The objectives determined the dimensions, coverage and criteria considered in setting the minimum wages. The objectives of a minimum wages policy include addressing efficiency issues in labour markets, promoting productivity growth and reducing poverty or inequality. While the Malaysian government’s concern to improve the living standards of the poor and vulnerable is valid and merit serious attention, it is not the most appropriate instrument to address poverty and inequality. Besides that, many of the poor people are unemployed or employed in the informal sector where wages are not binding. Hence, the main justification for introducing and implementing a minimum wage policy in Malaysia would be to address inefficiencies in the labour markets that preclude competition, which can lead to the suppression of wages, especially the low-skilled and low-income workers. Comparisons are made among countries that have implemented the statutory minimum wages policy. This will help many to understand the common and different features that Malaysia has with them.

Index Terms—Minimum wages, concept, justification, Malaysia.

N. A. Ibrahim is with the Department of Economics, Faculty of Business Management, Universiti Teknologi MARA Malaysia
R. Said is with the Faculty of Economics and Management, Universiti Putra Malaysia (e-mail: rus@econ.upm.edu.my).

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Cite: N. A. Ibrahim and R. Said, "The Implementation of the National Minimum Wages in Malaysia," Journal of Economics, Business and Management vol. 3, no. 1, pp. 125-131, 2015.

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