Minimum Wage Policy

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The Minimum Wage Policy – will it serve its purpose here in Malaysia

The Minimum Wage Policy from the macro and micro perspective

A Review of Minimum Wage Policy and its Impact on Business Organizations in Malaysia

*(please choose or suggest)

Introduction

The first pronouncement of the first minimum wage announced by our Hon Prime Minister on 1st May 2012 was a long awaited announcement which marked the culmination of almost a year of speculation, argument, protests and criticism from both the proponents and opponents of the minimum wage policy. This imposition of minimum wage policy is a very important step in the area of human capital development in our country and as such it is proposed that a critical review and evaluation of its predicted effects on the business organizations in Malaysia is proposed here.As this development is fresh off the press, no statistics are available and any evaluation will be based on comparative studies and our own observations.

This review will be divided into several sections:-

i) The first section will consist of a brief description of the history and theory of the minimum wage policy, as well as its advantages and disadvantages.(Jason)

ii) The second section will be an examination of the National Wages Consultative Council Act 2012 (which empowers the National Wages Consultative Council to decide, impose and enforce the minimum wage) with a critical review of the policy.(LP)

iii) In the third section, a comparative study on the effects of the minimum wage policy in developed […. ] and developing coutries[…. ] will be made. [Joey).

iv) The fourth section consists of the results of interviews with [ ] businesses in the plantation, hotel and manufacturing sectors to judge their reaction to the policy. (Mun Kit)

v) In the fifth section, the management decisions that business organizations can or will make in the light of the new minimum wage policy is considered.

Section 1: Minimum Wage Policy

The global wage growth has decreased significantly due to the global economic slowdown and financial crisis. According to International Labour Organization, minimum wage defined as “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” (International Labour Organization, 1996 - 2012). It is believe that through the implementation of minimum wages can improve the economic and social conditions of low-wages families and ensuring low-wages households get fair shares of every percentage of economic growth. However, setting minimum wages that higher than efficient market determinant will contribute to the increase of unemployment rate in the long run. Minimum wage can be classified into four types: national minimum wage which is applicable to everyone in the country, minimum wage policy that applicable to specific regions that have similar characteristics in terms of economic development and labour market situation, setting policy according to economic sector and setting according to professional category (Ricardo Infante, Andrés Marinakis, & Jacobo Velasco, 2003).

The Malaysia Parliament has passed the National Wages Consultative Council (NWCC) bill on July 2011 and the first minimum wage scheme was announced on 1st May 2012. There are three existing mechanisms in place: Wages Councils Act 1947, Collective bargaining and Market forces. These mechanisms are insufficient to fulfill the standard of living of low-wages families, rarely update and only cover small number of workers. On September 2011, the Wages Council Act 1947 was no longer effective. Proponents of minimum wage policy suggest that through the implementation of national minimum wage policy will improve the productivity and generally improve the competitiveness of SMEs. However, the opponents of the minimum wage policy concerned that with the implementation of national wage...
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