Minimum wage in malaysia
Transcript of 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
Minimum Wages Around the World (cont.)
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
Minimum Wages Around the World (cont.)
India
Minimum Wages Around the World (cont.)
Source: Minimum Wage Database in www.wageindicator.org, retrieved on 7th November, 2012
India
Minimum Wages Around the World (cont.)
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 Wages Around the World (cont.)
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
Minimum Wages Around the World (cont.)
Pakistan
Source: Minimum Wage Database in www.paycheck.pk, retrieved on 8th November, 2012
Minimum Wages Around the World (cont.)
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)
Minimum Wages Around the World (cont.)
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?
Source: Lee Heng Guie, Minimum Wage Policy - Curse or Cure, CIMB Economic Update (2012)
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?
Source: Lee Heng Guie, Minimum Wage Policy - Curse or Cure, CIMB Economic Update (2012)
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.)
Factors influencing perception
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
Factors influencing perception
• 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