minimum wage in malaysia

A Survey on Employees Perceptions Towards the Implementation of Minimum Wage Policy in Malaysia - The Proposal -

Part 1: Introduction

Background of Study

Problem Statement

Objectives of Study

Scope of Study

Significance of Study

Background of Study Minimum wage regulation had first been developed in New Zealand

(1896) followed by Australia (1899) and later by Britain (1909). ˡ

Then, others countries followed suit in subsequent years; France (1915), Norway (1918), Austria (1918), Czechoslovakia (1919), Germany (1923), Spain (1923) and Belgium (1934). ˡ

The definition of minimum wages in ILO in the Article 7 of the ILO Convention No. 131 on Minimum Wage Fixing (1970) and its accompanying Recommendation No. 135.

The lowest basic wage guaranteed by law as an attempt to put a floor under the wages of a particular subgroup of the working population (‘working poor’).

The minimum wage should not be fixed at a lower rate than one which would ensure the subsistence of the worker and his or her family.

Malaysia has not ratified to this Convention

Source: (1) ILO Minimum Wage Policy- An International Review of Practices and Problems, Gerald Sterr, ILO, Geneva, pp.1-2

Definition

Under section 2 of the Employment Act 1955, the term “wages” means basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service but does not include-

a) the value of any house accommodation

b) employer’s contribution to any retirement scheme

c) any travelling allowance or the value of any travelling concession;

d) any sum payable to the employee to defray special expenses entailed on him by the

nature of his employment;

e) any gratuity payable on discharge or retirement; or

f) any annual bonus or any part of any annual bones.

Malaysia: Section 2 of the National Wages Consultative Council Act

2011 (Act 732)

“minimum wages means basic wages”

Problem Statement The slow growth of wages relative to labour productivity

(wage

rate increases about 2.6% annually compared to productivity

rate of 6.7%) – shows the suppression of wages, especially

those of low skilled workers inefficiencies in the labour market

There were 30.6% (2010) of the total wage earners living

on

basic wages less than RM720 per month! below the poverty

line income (PLI 2009)

Source: Poverty Line Income Report (2009)

Problem Statement (cont.)

Unskilled worker are underpaid : –

wages below poverty line < RM 720

Creates feeling of unhappiness thus affecting employees

performance and productivity

Source: http://www.nst.com.my Retrieved on 5th November, 2012

Research Objectives

1. To explore the awareness level regarding the implementation of minimum wage policy in Malaysia among private sectors employees;

2. To identify employees perception (whether it is positive or negative)

towards the implementation of minimum wage policy;

To identify factors influencing employees perceptions on the

implementation of minimum wage policy.

Scope of Study

Focus on the employees perceptions towards the

implementation of minimum wage policy

This survey on employees perceptions will be

targeted to 30 employees working in private

sectors in Shah Alam

Significance of Study is regarded as the importance or relevance of conducting

study in this particular issue of employee perception

toward the implementation of minimum wage policy in

Malaysia.

Benefits of conducting this survey:

- The government and the employers will be able

to understand the employees’

stands and views on the issue of

implementing minimum wage in Malaysia

- The employees will be able to express

their whether it is positive or

negative about the minimum

wage (the survey will serves as a platform

for the employees to express their opinions)

Part 2: Literature Review, Theoretical Framework & Research Question

Definition of minimum

wageMinimum

wages around the

world

The implementation of minimum wage in

Malaysia

Definition of perception

Factors influencing perception

Positive and negative

perceptions

Definition of minimum wage

Minimum wage is the lowest level of remuneration permitted; the wage which in each country has the force of law and which is enforceable under threat of penal or other appropriate sanctions (International Labor Organization , 1967)

Minimum wage refers to the minimum sum payable to a worker for work performed or services rendered within a given period, whatever calculated on the basis of time or output, which is guaranteed by law and which may be fixed in such a way to cover the minimum needs of the worker and his or her family, in the light of national economic and social conditions (Thiagarajah, 2000)

Sources: 1. International Labor Organization (ILO) Convention – 168th Session in Geneva Feb-Mar 1967 2. Ram Thiagarajah, A Study on Minimum Wage Fixing in Malaysia - Malaysian Trade Union Congress (2000)

Minimum Wages Around the World

Minimum Wages Around the World (cont.)

China

The Provisions on Minimum Wage was promulgated by Ministry of Labour and Social Security on January 20, 2004 and enforced on March 1, 2004

• Different provinces/ regions have various level of minimum wages• No national minimum wage exists

There are more than one minimum wage exists in China

• By Law, minimum wages in China are updated once in two years• However, in practice the minimum wages are adjusted once a year

in most places

Up-ratings or adjustments of minimum wages are jointly decided by the government, employer and trade union representatives

Source: Minimum Wage Database in www.wageindicator.cn, retrieved on 7th November, 2012

China

Source: Minimum Wage Database in www.wageindicator.cn, retrieved on 7th November, 2012


India

Source: Minimum Wage Database in www.wageindicator.org, retrieved on 7th November, 2012

There is a separate minimum wage legislation in India

Minimum Wages Act, 1948 is an Act to provide for fixing minimum rates of wages in certain employments and it extends to the whole India

More than one minimum wages exist in India

Minimum wages are declared at national, regional, sector and occupational skill level

Revision period of the fixed component of minimum wages can be anywhere within 5 years of its fixation


India


Source: Minimum Wage Database in www.wageindicator.org, retrieved on 7th November, 2012

Indonesia

Source: Minimum Wage Database in www.gajimu.com, retrieved on 7th November, 2012


Minimum wage is a minimum standard that is

used by employers to pay their workers legally

The wage applies to those who are single and

have a 0-1 year work experience

There is more than one minimum wages

determined by law (province and district

level)

Minimum wages are calculated on monthly

basis, and for daily workers can be paid on daily or weekly basis

The fixed component gets updated one in ten years based on inputs received from the National Wages

Council and is then decided by the President/ Manpower

Minister

Indonesia

Source: Minimum Wage Database in www.gajimu.com, retrieved on 7th November, 2012


Pakistan

Source: Minimum Wage Database in www.paycheck.pk, retrieved on 8th November, 2012


Minimum wage in Pakistan is set by the following two acts: 1. Pakistan Minimum Wages for Unskilled Workers Ordinance, 1969 and 2. The Minimum Wages Ordinance 1961

There exists a national minimum wage as announced by government for unskilled workers. However, certain province (e.g. Punjab) also fixes minimum wage rates that differ between industries and skills

Up-ratings or adjustments of minimum wage is decided upon review on changes in economic conditions or cost of living

South Korea

Source: Lee Changgeun, Challenges for Minimum Wage Campaign in South Korea (2012)


The minimum wage is determined by the Ministry of Employment & Labour (MOEL) based on recommendations from the Minimum Wage

Council

The minimum hourly wage for 2012 is 4540 won (about 4 USD)

The Minimum Wage Act was implemented in 1988 and has applied to all workers since November 2000 except family businesses that hire only

family members, domestic workers and seamen

The Implementation of Minimum wage in Malaysia

General Overview

Mechanisms that determine the wages

of workers in the private sector

Wages Council Act 1974

Collective bargaining (CA) Market forces

Minimum wage

Do not provide a decent standard of living and cover

only a small number of workers

Wages in Malaysia are largely determined by

market forces

Source: Lee Heng Guie, Minimum Wage Policy - Curse or Cure, CIMB Economic Update (2012)

What it entails?

• Minimum wage in Malaysia has been set at RM900/month for Peninsular Malaysia and RM800/month for Sabah, Sarawak and Labuan

• It will be initially implemented on 1st January, 2013

Who will benefit?

• About 3.2 million private sector workers (25.8% of total employment) will be involved in this policy

Which groups or

sectors will be affected

• All formal private sector employees except those who are working in domestic services sector such as domestic helper and gardener

The Implementation of Minimum wage in Malaysia (cont.)

H

ow

does it

work

s?


When will it took effect?

• The minimum wage will take effect six months from the date the Minimum Wage Order is gazetted

• SMEs are given the opportunity to apply to the wage council for an extension before the commencement date

How regularly will it be

reviewed?

• The National Wages Consultative Council will recommend the minimum wage to the government once every two years

The Implementation of Minimum wage in Malaysia (cont.)

H

ow

does it

work

s?


The perceptions towards minimum wage policy

What is perception?

Perception is a process by which people select, organize,

interpret, retrieve and respond to information from the

world around them (Schermerhorn, Hunt & Osborn, 2010)

Perception is a process by which individuals organize and

interpret their sensory perceives in order to give meaning

to their environment. Perception can vary widely among

individuals exposed to the same reality (Rao, 2008)

Sources: Schermerhorn et al., Organizational Behavior 8th edition (2010) Sree Rama Rao, Factors Influencing Perceptions (2008)

The perceptions towards minimum wage policy (cont.)


Perception

Source: Schermerhorn et al., Organizational Behavior 8th edition (2010)

Perceptions

Employers Employees Government

The perceptions towards minimum wage policy (cont.)

Interested parties

Positive (+ve)

Negative (- ve)

Possible positive perceptions and its factors

Factors PerceptionsThe perceiver- Interests (ensure satisfaction of

their needs)- Experience (current salary level)- Expectation (to have decent and

fair wage) The situation- Increase in cost of living The target- Characteristics of minimum

wage (minimum wage serves as a standard for wage determination, mandated and governed by law)

(+) The implementation of minimum wage

policy in Malaysia is good because:

- Minimum wage will provide them

necessary social protection to enable

them overcome poverty (Lee, 2012;

Thiagarajah, 2000)

- Minimum wage will increase their

purchasing power (Thiagarajah, 2000)

- Minimum wage will increase pay rates

of low-paid employees (Verner, 2009;

Nolan, O’Neill & Williams,2001)

- Minimum wage will increase morale

and productivity (Nolan, O’Neill &

Williams,2001)

Possible negative perceptions and its factors

Factors PerceptionsThe perceiver- Interests (ensure satisfaction

of their needs)- Experience (current salary

level)- Expectation (to have decent

and fair wage) The situation- Increase in cost of living The target- Characteristics of minimum

wage (minimum wage serves as a standard for wage determination, mandated and governed by law)

(-) The implementation of minimum

wage policy in Malaysia is bad because:

- Minimum wage will force employers to

cut certain fringe benefits to reduce

costs (Wilson, 2012; Falk, Fehr &

Zehnder, 2006)

- Minimum wage will increase

inflationary pressure (Wilson, 2012)

- Minimum wage will lead to

unemployment (Carpio, Nguyen &

Laing, 2012; Ni, Wang & Yao, 2011;

Wang & Gunderson, 2011)

Theoretical Framework


• Needs satisfaction• Salary level• Future expectation

on fair wage• High cost of living• Characteristics of

minimum wage

Employees perception towards

minimum wage• Positive• Negative

Independent Variables

Dependent Variable

Research Questions

Is employee aware on the minimum wage policy gazetted in

Malaysia? – to achieve objective 1

Does employee think that the implementation of minimum

wage policy is good (positive) or bad (negative)? –to achieve

objective 2

What are the factors that lead to the positive or negative

perceptions? – to achieve objective 3

Research Design & Methodology

Research design

The population and sample

size

Sampling technique

Data collection method and

sources of data

The data analysis

Research Design

The research design that will be use in this research is

exploratory study

This is because a study on employees perceptions

towards the implementation of minimum wage is very

limited and not much is known on the perceived

situation

This type of research design is to explore the employees

perceptions towards implementation of minimum wage

in Malaysia

Research Design cont.

The unit of analysis for this study is individual (the individual

here is referring to the employee working in private sector)

Time horizon for this study will be a cross-sectional study

whereby the data will be collected at one point in time.

The population & sample size

The population of this study is the employees who are

working in private sector in Shah Alam

The sample size of this study is 30 employees from the

total population

Refer to Roscoe (1975) sample sizes larger than 30 and

less than 500 are appropriate for most research

Sampling Technique

Non-probability sampling will be used in this study

Convenience sampling technique will be used which the

respondents are selected because they happen to be in the right

place at the right time.

Data Collection Method

The data will be collected by conducting a structured

interviews with the respondents

A list of predetermined questions will be prepared before

the interview is conducted

All the answers given by the respondents will be taken

down or recorded for the purpose of analysis

The same questions will be used throughout the

interview sessions with all the respondents and will be

asked in the same manner.

Sources of Data

Primary data

- Data will be collected through structured interview

Secondary data

- Data will be collected from the journal articles,

reports, periodicals and web documents

The Data Analysis

The primary data collected from the interview session with the respondents will be analyze by using content analysis method

Content analysis is a research tool or technique for the objective, systematic and quantitative description of manifest content of communications (Berelson, 1952)

It is used to determine the presence of certain words, concepts, themes, phrases or sentences within texts or sets of texts and to quantify this presence in an objective manner

minimum wage in malaysia

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