The Need for a Regional Minimum Wage
- Malaysia's minimum wage policy was first introduced in 2013. Throughout the period 2013-2025, the minimum wage has been revised five times (2016, 2019, 2020, 2022, 2025) from RM900 per month in 2013 to RM1,700 per month in 2025, marking an increase of 88.9%.
- The minimum wage policy initially differed between Peninsular Malaysia and Sabah and Sarawak, a practice that lasted until 2018. While the minimum wage was uniformly set at RM1,100 per month between January 2019 and January 2020, the Government introduced a transitional adjustment, raising minimum wage to RM1,200 per month in city and municipal council areas, while other areas remained at RM1,100 per month since February 2020. Started May 2022, this was replaced by a uniform national minimum wage again at RM1,500 per month and subsequently raised to RM1,700 per month with effect from February 2025, with microenterprises who hired less than five employees can comply at a later phase. While these reforms were intended to promote equity and standardisation, persistent gaps in compliance continue to undermine their effectiveness.
- There are calls now for establishing a minimum wage rate based on states and local conditions, accounting for differences in socio-economic conditions and demographic. Regional minimum wages can be a better option than a single national minimum wage policy because they can account for regional differences in cost of living, socioeconomic factors, and labour market conditions.
- The following arguments validate for the implementation of a regional minimum wage:
- Better reflection of localised economic realities. Different states have different economic and business conditions, with varying level of income levels, labour market conditions, and business costs. Hence, a regional minimum wage can better accommodate differences in minimum wage.
- More equitable distribution of income. By adjusting the minimum wage based on varying cost of living across different states/regions while considering local economic and business conditions. This can help ensuring that workers in high-cost areas can afford necessities while not unduly burdening businesses in lower-cost areas.
- Stimulating local economies. Higher minimum wage for workers living in high cost of living areas can help to improve their purchasing power, supporting domestic spending and spur economic activity.
- Reducing labour market distortions. A uniform minimum wage might force some businesses operating in slower economic growth amid high business costs areas to reduce employment due to higher labour costs. A regional minimum wage would better align wages with local economic conditions.
- This paper reviews the current minimum wage determination, and its appropriateness, explores the option of implementing regional minimum wage, and its challenges.
