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Paving the way for setting mininum wages

June 30, 2011

The Dewan Rakyat passed the National Wages Consultative Council Bill which will empower the council to review and set the mininum wage order.

KUALA LUMPUR: The Dewan Rakyat today approved the National Wages Consultative Council Bill 2011 to pave the way for the setting up of the National Wages Consultative Council.

Human Resources Minister Dr S Subramaniam said the council would function as an independent body to review and set minimum wages based on the tripartite principle involving the government, employers and workers.

He said the council would be assisted by a professional group in the technical committee made up of experts in economics, statistics and social science.

The bill spells out that employers, who do not pay the salary as specified in the minimum wage order, will be fined not exceeding RM10,000 per employee, if convicted, he added.

Subramaniam said the employers would also be compelled to pay any differences in the salary to employees, who were found to be paid below minimum wages, besides being imposed other related charges.

For subsequent offences, the proposed penalty is a fine not exceeding RM1,000 per day for each offence while for repeated offences the proposed penalty is a fine up to RM20,000 or imprisonment not exceeding five years for each offence.

He said the minimum wage would help low-income earners increase their purchasing power in the face of rising cost of living and address the issue of poverty among the working poor.

“The minimum will also endeavour to prevent exploitation of workers as employers find the easy way out of recruiting foreign workers, who are willing to accept low wages.

“It is also aimed at optimising the use of local manpower and encourage employers to move up the value chain through investment in high technology and enhance workers’ productivity,” he said.

He said at present, wages for employees in the private sector were determined by three methods.

They are firstly, the market power based on labour supply and demand; secondly, the collective agreement as a result of negotiations between unions and employers; and thirdly through the National Wages Council under the National Wages Council Act 1947.

“Of the three methods, only the National Wages Council set the minimum wage. However, the minimum wage is limited to certain sub-sectors for vulnerable groups such as shop assistants, port, hotel and food outlet workers, and security guards,” said Subramaniam.

Maket forces

The minister said wages determined by market forces were found to be ineffective based on studies conducted by the World Bank and in Malaysia’s case, wages increased only at the rate of 2.6% per year for the past 10 years.

The National Employment Survey in 2009 involving a sample of 24,000 employers and 1.3 million employees found that 33.8% of employees earned below RM700 per month, he added.

Subramaniam said the implication from the implementation of the minimum wage on the economic and social development would be very far-reaching, complex and uncertain.

“The minimum wage has given a positive impact on the socio-economic development of the United States, China, France, Taiwan and the United Kingdom.

“However, if the minimum wage is set too high, theoretically it could lead to increase costs of doing business for employers and encourage employers to reduce the number of workers, thus increasing unemployment,” he said.

Meanwhile, an attempt by M Kulasegaran (DAP-Ipoh Barat) to refer the bill to the Select Committee under Standing Order 54 (2) failed as the majority won the division with 69 members from Barisan Nasional voted against it while 29 from the opposition in favour of it.



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