EARLY EFFECTS & CHALLENGES OF MINIMUM...
Transcript of EARLY EFFECTS & CHALLENGES OF MINIMUM...
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National Minimum Wage: Symposium & Policy Round Table
Johannesburg, South Africa 2 – 4 February 2016
Ministry of Human Resources Malaysia
EARLY EFFECTS & CHALLENGES OF MINIMUM WAGES IN MALAYSIA: SHARING OF PRE & POST ECONOMIC & SOCIAL INDICATORS by T. Shanmugam Secretary National Wages Consultative Council Malaysia
MoHR
Outline of Presentation
Part 1: Summary on Malaysia & Minimum Wages (MWs) in Malaysia Part 2: Economic Indicators (Pre & Post MWs)-
a. Salaries & Wages b. Mean Wages c. Share of CE to GDP d. Unemployment Rate e. Labour Force Participation Rate f. Productivity Growth g. Poverty Line Income h. Income Inequality (Gini Coefficient) i. Consumer Price Index j. Foreign Direct Investments (FDI) (k-n) Insolvent Companies, etc (o-s) Complaints, Claims, Trade Disputes, etc
Part 3: Challenges of Implementing MWs in Malaysia Part 4: Summary Part 5: Conclusion Part 6: Moving Forward & Suggestions 2
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Part 1: Summary on Malaysia (2015) Political System : Parliamentary Democracy with Constitutional Monarchy Economy : GDP: RM877.2 billion GDP Growth: 6.0% Unemployment rate: 3.0% Labour Force: 14.4 million Inflation Rate : 3.0% Per Capita Income : US$9,914 Climate: Tropical, annual monsoon Area: 330,290 km2
Religion: Islam, Buddhist, Hindu & Christian Ethnic Groups: Malay, Chinese, Indians & Others
Population : 30.6 million Capital : Kuala Lumpur Admin Capital : Putrajaya Official Language : Bahasa Malaysia
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OBJECTIVES OF MINIMUM WAGES
• to ensure basic needs of workers and their families are met;
• to provide sufficient social protection to workers;
• to encourage industry to move up the value chain by investing in higher technology and increase labour productivity; and
• to reduce nation’s dependence on unskilled foreign labour.
Objectives
1. Minimum Wages (MWs) is “basic wages”.
2. MWs does not include allowances & value of non-‐monetary benefits.
3. Handholding employers throughout year 2013.
4. MWs Order 2012 consists of:
5. SMEs given blanket deferment in 2013 (for foreign workers only).
6. July 2015-‐ GazeQe of addiRonal tax rebate for SMEs for addiRonal cost for payment of minimum wages in 2014.
Summary on MWs in Malaysia
Later commencement date for micro employers @ 1 July 2013
ApplicaRon for deferment
Clause for restructuring of wages
(with consent) from union/workers
Reduced rate for probaRoners
Non applicaRon for DomesRc Worker
Commencement for non-‐micro employers on 1 January 2013
RM900 (US$217) for Peninsular Malaysia RM800 (US$193) for
states of East Malaysia
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MINIMUM WAGES FIXING CRITERIA
CRITERIA JUSTIFICATION
BASE CRITERIA
Poverty Line Income (PLI)
Determine the basic needs of the worker and his / her family
Median Wage A point of reference for employers ability to pay
ADJUSTMENT CRITERIA
Changes in Consumer Price Index (CPI)
An indicator to reflect changes of cost of living
Productivity Growth (P) Re-aligning productivity growth with wage increase
Real Unemployment Rate (UE)
To ensure wage increase do not hamper the market ability to create and retain employment
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MINIMUM WAGES FIXING FORMULA FOR MALAYSIA
MW = Minimum Wages (RM) PLI = Poverty Line Income (RM) P = Productivity growth (%) CPI = Consumer Price Index (% change) UE = Real Unemployment Rate (%)
= (Unemployment rate – 4%) i = Region (Peninsular Malaysia, Sabah and
Sarawak)
Part 2 : Economic Indicators (Pre & Post MWs)
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1100
1200 1206
1300
1000
1050
1100
1150
1200
1250
1300
1350
2011 2012 2013 2014
Malaysia
Source : Department of Statistics Malaysia (DOSM)
Ringgit Malaysia (RM)
(a) Salaries & Wages: Malaysia
Minimum Wages 1.1.2013
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(b) Mean Wages : Malaysia
Source : Department of StaRsRcs Malaysia (DOSM)
Minimum Wages 1.1.2013
Ringgit Malaysia (RM)
0
500
1 000
1 500
2 000
2 500
2011 2012 2013 2014
1 814 1 916 2 052 2 231
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(c) Share of Compensation of Employees to GDP (%) : Malaysia
Source : Department of StaRsRcs Malaysia (DOSM) and Economic Planning Unit (EPU), Malaysia
Minimum Wages 1.1.2013
(%)
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(d) Unemployment Rate : Malaysia
2.8
2.85
2.9
2.95
3
3.05
3.1
20112012
20132014
3.1
3.0
3.1
2.9
Source : Department of StaRsRcs Malaysia (DOSM)
Minimum Wages 1.1.2013
(%)
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Source : Department of StaRsRcs, Malaysia (DOSM)
(e) Labour Force Participation Rate : Malaysia
Malaysia
62.0
64.0
66.0
68.0
20112012
20132014
64.4 65.5 67.067.5
Minimum Wages 1.1.2013
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Source: Malaysian ProducRvity CorporaRon (MPC)
(f) Productivity Growth : Malaysia
1.9 1.8
0.9
3.5
0
0.5
1
1.5
2
2.5
3
3.5
4
2011 2012 2013 2014
Malaysia
Minimum Wages 1.1.2013
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Source : Economic Planning Unit, Malaysia (EPU)
(g) Poverty Line Income : Malaysia
Ringgit Malaysia (RM)
Years
Minimum Wages 1.1.2013
753
800
861
950
0 200 400 600 800 1000
2007
2009
2012
2014
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(h) Income Inequality (Gini Coefficient) Malaysia’s Gini coefficient series shows a clear downward trend in
household income inequality from 2004 to 2014. In 2014, Income Inequality plunged to the lowest level which reflects a positive trend.
Minimum Wages 1.1.2013
3.2
1.6
2.1
3.2
0
0.5
1
1.5
2
2.5
3
3.5
2011 2012 2013 2014
Malaysia
Malaysia
Minimum Wages 1.1.2013
Source : Department of StaRsRcs Malaysia (DOSM)
Years
( % )
(i) Consumer Price Index : Malaysia
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Source : Department of StaRsRcs Malaysia (DOSM)
(j) Foreign Direct Investment : Malaysia
Minimum Wages 1.1.2013
Malaysia 0
10 000
20 000
30 000
40 000
2011 2012 2013 2014
37 325
28 537
38 175 35 344 Million
Ringgit Malaysia (RM)
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(k) Insolvent Companies : Malaysia
Source: Department of Insolvency
Minimum Wages 1.1.2013
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(L) New Foreign Company Registered : Malaysia
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75 72
59
0
10
20
30
40
50
60
70
80
2011 2012 2013 2014
Source: Companies Commission of Malaysia (SSM)
Total
Minimum Wages 1.1.2013
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(m) New Local Companies Registered : Malaysia
45,408 45,366
46,289
49,144
2011 2012 2013 2014
2011 2012 2013 2014
Source: Companies Commission of Malaysia (SSM)
Minimum Wages 1.1.2013
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(n) Companies Closed Operation & Left Malaysia
Source: Companies Commission of Malaysia (SSM)
Minimum Wages 1.1.2013
0
5,000
10,000
15,000
20,000
25,000
30,000
2011 2012 2013 2014
20,121 20,38018,161
26,966
Total
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1 389
453
0
200
400
600
800
1 000
1 200
1 400
1 600
1 2 2015 2014 Year
(o) Complaints Relating to Minimum Wages (2014 & 2015)
Source : Secretariat, NWCC
Reduced by 67.38 %
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No. of Complaints Filed
1 111
618
0
200
400
600
800
1 000
1 200
1 2 2014 2015 Year
(p) Claims Relating to Minimum Wages at Labour Court (2014 & 2015)
Source : Secretariat, NWCC
Reduced by 44.37 %
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No. of Claims Filed
No. of Cases Filed 46
10
0 5 10 15 20 25 30 35 40 45 50
1 2 2014 2015 Year
(q) Trade Dispute Cases Relating to Minimum Wages (2014 & 2015)
Source : Secretariat, NWCC
Reduced by 78.26 %
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81 200 80 028
1 172 0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
No. of InspecRon No. of Compliance No. of Non-‐Compliance
99% complied No. of Companies
1% not complied
(r) Minimum Wages Statutory Inspection (2014 & 2015)
Source : Secretariat, NWCC 26
(s) Prosecutions Relating to Minimum Wages (2014 & 2015)
Source : Secretariat, NWCC 27
Part 3: Challenges of Implementing MWs in Malaysia
1. MWs for micro employers.
2. Separate MWs for foreign workers.
3. MWs for disabled workers.
4. MWs for workers in Non-‐Profit EnRRes (NPEs), Welfare Homes and Senior CiRzen.
5. MWs for hotel workers @ service charge components.
6. MWs for workers in privaRzed government contracts.
7. MWs increases cost of labour for employers.
8. MWs is too low from Workers point of view!
9. MWs is too high from Employers point of view!
10. MWs should also apply equally to DomesRc Workers!
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PosiRve Vibes: Increase in Wages & Salaries; Increase in Mean Wages; Increase in CE share to GDP; Reduced Unemployment Rate; Increase in LFPR; Increase in ProducSvity growth; Increase in PLI; Reduced Gini Coefficient Indices; Lesser number of companies become Insolvent; Increase in number of local companies RegistraSon; Reducing trend of complaints, claims from Workers and etc….
NegaRve Vibes: CPI increased; FDI reduced; Drop in registraSon of foreign companies; Increase in companies closing down and leaving Malaysia.
cont….
Part 4: Summary
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1. MWs is to transform the Malaysian Economy / Labour Market by 2020.
2. MWs is sRll new in Malaysia beginning January 2013.
3. Challenges and hiccups are inevitable – addressed in triparRte manner.
4. Short term effect– higher cost of doing business.
5. Long term effect – will augment in transforming the economy.
cont….
Part 5: Conclusion
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6. Government of Malaysia is commiQed to ensure success of the MWs policy-‐ taking stock of exisRng triparRte arrangements in Malaysia.
7. SMEs (including micro employers) need to revisit their business model/ wage structure.
8. No significant negaRve effect of 2012 MWs Order.
9. 2016 & 2017? -‐ Global Economic gloom?; depreciaRon of Ringgit Malaysia (RM) against US Dollars (US$)?; China’s economy slowdown and DepreciaRon of oil price in world market?
Conclusion (cont…)
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1. REVIEW OF THE MWO 2012: January 2016 – Completed review of 2012 MWs Order @ New Order expected by March 2016 to take effect on 1 July 2016.
New MW rate (pending GazeQe soon): (i) From RM900 (US$217) in Peninsular Malaysia to RM1,000 (US$241)
(11% increase) and from RM800 (US$193) in East Malaysia to RM920/ (US$222) (15% increase).
(ii) Removal of deferment applicaRon clause; clause on reduced rate for
probaRoners and clause on restructuring of wages.
(iii) DomesRc workers remain excluded.
(iv) Introduced MW for piece rated, task work, trip, commission and tonnage based paid employees.
Part 6: Moving Forward & Suggestions
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2. Success of MWs policy lies in effecRve enforcement.
3. Capacity building of enforcement officers. 4. Increase in number of enforcement officers.
5. Get professional / External advice (i.e. World Bank / ILO etc)
6. No ‘one size fits all’ model on Minimum Wages.
7. Advisable to adopt a ‘balanced approach’ for first Rme implementaRon.
8. MWs should be based on empirical data and reality of economic indicators.
cont… Part 6: Moving Forward & Suggestions
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“Minimum wages is here to stay for
good and there is no turning back”
Commitment by Hon. Richard Riot Anak Jaem
Ministry of Human Resources Malaysia
on 25 June 2013
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Commitment b
THANK YOU Email add.: [email protected]
http://minimumwages.mohr.gov.my/