Higher Starting Wages - Dream or Doable?

Minister in the Prime Minister's Department Datuk Seri Mustapa Mohamed said that fresh graduates can expect a higher starting salary by the middle of this year, despite the pandemic bringing about the worst economic recession in Malaysian history, on top of already-high youth unemployment rates. Dr Juita Mohamad, Fellow at the Institute for Strategic and International Studies (ISIS) Malaysia, explains more.

1. Reality Bites

Juita pointed out that a higher starting salary for fresh grads sounds like a nice idea, but it’s probably not going to be feasible. Despite the Finance Ministry’s projection last year that Malaysia’s GDP growth would bounce back to 7% in 2021, many experts agree that the global economy won’t return to normal until 2022, therefore it doesn’t look as if issues like unemployment and starting salaries are going to be addressed this year.

2. Power to the Workers

On top of that, solving the problem of low starting salaries isn’t as simple as picking out a number. We have to introduce minimum wage laws and put in efforts that empower workers, like collective bargaining agreements, trade associations, and worker associations that are able to negotiate better wages and working conditions. Currently, workers associations in Malaysia are monitored too strictly to enact any sort of change, unlike in countries like Vietnam and Indonesia, where trade unions have more power.

3. Good for Business

Juita also addressed a common belief that trade and worker associations make it harder to do business. On the contrary, productivity increases when workers are compensated, taken care of, and given conducive working conditions. Countries with robust economies and workforces often have strong collective bargaining mechanisms. If Malaysia had become part of the Trans-Pacific Partnership (TPP) trade agreement, we would have had to facilitate collective bargaining as part of the treaty – but unfortunately the TPP ground to a standstill when the US withdrew back in 2017.

4. Gotta Go Gigging

So what should fresh grads do now? For the time being, Juita suggested that they should work on upskilling themselves, or continue their studies if they can afford it. The gig economy is good for on-demand jobs in the short term, but it doesn’t give good job or social security, since most don’t provide much in the way of employment insurance or retirement savings. The government has provided support for companies in the gig economy under several stimulus packages, in the hope that they will extend that support to their workers, but Juita expressed hope that those measures might be expanded further in future.

5. Government Consideration

Jobs are scarce, especially since many companies are in survival mode due to the pandemic. The Malaysian government could therefore look into implementing hiring and retraining schemes, to help those who struggle to find work. What’s more, with a review due for early next year, the government should also continue to raise the country’s minimum wage to match rising living costs and inflation rates – since wages not changing for 10 years is especially unnatural for a developing country like ours.

Do you think a higher starting salary is a good idea, or will it negatively affect existing workers? Will collective bargaining and worker safety just create complacency amongst workers instead of forcing them to compete for jobs? Let us know your thoughts.

Written by Toby Teh and Edited by Lyn Mak