Living wage, the way forward?

More and more Malaysians are feeling the pinch of the pandemic and inflation. They complain that their monthly salaries are insufficient to purchase daily necessities and pay their bills.

Although the inflation rate eased from 4% in November 2022 to 3.8% in December 2022, the price of food and beverages is higher than in pre-pandemic days. Rice, bread and other cereals, meats and milk, cheese and eggs are among the three food and beverage subcategories that recorded a more than 7% increase in inflation in the final month of last year.  

The ongoing Russia-Ukraine war has put Malaysia in a more vulnerable position. With less land for agricultural production since transforming into an industrialised country in the 1970s, Malaysia has been over-reliant on imported food items. 

Industrialisation speeds up the development of major cities in Malaysia like Kuala Lumpur, George Town, Johor Bahru, Kota Kinabalu and Kuching. Yet, Malaysia remains stuck in the low-wage, low-cost economic model, with a high influx of low-skilled foreign labour. 

During a recent interview, Deputy Human Resources Minister Mustapha Sakmud stated that his salary was only RM1,800 per month despite engineering already emerging as a highly-skilled profession in 1993. When his son graduated from engineering in 2019, the starting salary had increased by merely 28% (i.e. RM2,300) compared to two decades ago. 

My friend working as an ophthalmologist at a public hospital mentioned that he can only earn RM14 per hour when working overtime or on call for 24 hours during weekdays. It is even worse during weekends: only RM9 per hour. 

How can fresh graduates survive with the increasing cost of living? If employers did not provide salary increments during the past two years of the pandemic, how can employees manage their expenses with a shrinking disposable income?  

Many contract medical officers are leaving Malaysia for good due to low wages, improper public hospital and clinic facilities, and bleak career prospects. Young Malaysians who pursue degrees overseas also make up their mind not to return to their home country for professional opportunities after graduation as they can earn at least two to three times more than the salary they would receive in Malaysia. 

As many skilled and talented Malaysians opt for greener pastures, Malaysia faces a serious brain drain issue. The human resources ministry indicated that Singapore has almost one million Malaysian workers, followed by Australia, the US, the UK and Canada. 

Bank Negara Malaysia also stated that the living wage for an adult based in Kuala Lumpur was RM2,700 as of 2018. It would not be surprising if the current desired living wage rises by 25% (i.e. RM3,375). 

I previously mentioned that the optimal living wage in my home state, Sabah, might require RM3,000. 

Kota Kinabalu, my home town, does not have a proper public transportation system even today. The locals need cars to get around. With a four-time increase in the overnight policy rate (OPR) last year, those obliged with housing and car loan instalments have had to fork out at least an extra RM100 each month.  

The worst is, the food in Kota Kinabalu is relatively more expensive than in Kuala Lumpur. During my recent trip back to Kota Kinabalu for the Chinese New Year break, the average price of pork noodles at a coffee shop (without air-con) was around RM12. In contrast, when I have lunch or dinner at shopping malls around Kuala Lumpur, I only have to pay RM3 extra (i.e. RM15). 

While Anwar Ibrahim repeatedly emphasised his priority on resolving the cost of living crisis the moment he was sworn in as prime minister at the end of November last year, the government administration also has to put great emphasis on a living wage instead of a minimum wage – the benchmark to match the actual cost of living among Malaysians. 

Bank Negara defines a living wage in its report "The Living Wage: Beyond Making Ends Meet" (2018) as the wage level that can afford the minimum acceptable living standard.

As more middle-income earners fell into the lower-income category during the pandemic, there was an increasing concern that more Malaysians might only be able to afford basic needs for their living. 

Some Malaysians have started to experience difficulties coping with the rising cost of inflation and recently pleaded with the government to allow another round of Employees Provident Fund withdrawals. 

Economy Minister Rafizi Ramli acknowledging the issue of insufficient high-skilled, high-paid job opportunities is a good sign. Nonetheless, to ensure that high-skilled jobs are associated with good remuneration packages, he has to pay attention to the existing labour laws and revise them accordingly. 

In particular, the Employment Act of 1955 remains associated with a time-based wage system instead of a productivity-linked one. Adopting a productivity-linked wage system would raise the country’s overall salary level, boost employees' morale and be more reflective of the current standard of living. 

When Malaysians can secure high-skilled, high-income employment within their country, they will be less likely to seek better job opportunities elsewhere. 

Amanda Yeo is a senior fellow at Pacific Research Center. 

The views expressed in this article are those of the author(s) and do not necessarily reflect the position of MalaysiaNow.