Home > Uncategorized > Wage rule has small impact on money outflow

Wage rule has small impact on money outflow

KUALA LUMPUR: There has not been any substantial spike in foreign workers’ remittance to their home countries resulting from the implementation of minimum wages at the start of this year, said Bank Negara Malaysia (BNM).

“There’s not much impact on monetary outflow despite a 20 to 25 per cent jump in their salaries,” said BNM’s assistant governor Dr Sukhdave Singh. He was responding to a question if Malaysia had experienced an outflow of more than RM2 billion following the blanket implementation of minimum wage law. 

Previously, Malaysia Employers Federation (MEF) executive director Shamsuddin Bardan estimated that foreign workers, on average, send back some RM700 each month, which is half of their take-home pay that include overtime claims. 

“With a conservative estimate of two million foreign workers here, that works out to be RM1.4 billion flowing out of Malaysia to their home countries every month. Starting 2013, with the blanket implementation of the minimum wage law, the outflow of money from Malaysia is likely to swell to RM2.1 billion every month,” Bardan reportedly said. 

Sukhdave says one need to look at this comprehensively. Minimum wages are good for the economy and it ensures Malaysia achieves its high-income nation goal,” he said, adding that a blanket wage floor eliminates the price advantage that foreign workers have over Malaysians, thus creating greater job opportunities for locals.

“Small and medium enterprises and the plantation sectors say it erodes our competitiveness. If these sectors’ competitiveness is based on low wages, then that’s the wrong economic structure,” he said.

“The main objective of minimum wages is for low-income earners to be able to afford their basic living needs here,” he added.

The Minimum Wages Order 2012, which took effect from January 1 2013, requires employers with six employees and above to pay a minimum wage of RM900 a month in the peninsula or RM800 a month in Sabah, Sarawak and the Federal Territory of Labuan.

Sukhdave was speaking to reporters after presenting his views on the country’s economic performance at a seminar organised by the Malaysian Economic Association here yesterday.

When asked to comment on Goods and Services Tax (GST) and government subsidy reduction, he said this tax can be implemented in a manner with no significant loss to low-income earners’ welfare. 

“As far as the government is concerned, many daily necessities like food products would actually be exempted from GST.

“As for subsidy rationalisation, you can physically transfer it directly to the lower income group. It would also significantly help offset any negative impacts of the subsidy rationalisation on the lower income households,” he said.

On the Economic Transformation Programme, Sukhdave said it has played a catalytic role in promoting private investment to the country’s economy.

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