Wages in Malaysia Too Low to Draw Local Workers: Bank Negara

April 2, 20189:12 am1491 views

Unattractive level of wages deemed to be reason why Malaysian workers tend to shun ‘dirty, dangerous, and difficult’ (3D) jobs in the country, according to an article published by Bank Negara Malaysia.

In the “Low-skilled foreign workers’ distortions to the economy” article, it is stated that more local workers are showing reluctance in undertaking 3D jobs. While cultural factors and the inherent nature of the work do play a role in deterring local involvement, there is an argument that this phenomenon is partly due to local wage conditions as well.

The article pointed out of the 200,000 daily commuters from Malaysia to Singapore, it was found that 40 percent were working in mid- to low-skilled jobs. This includes occupations that are often avoided in Malaysia, such as plant and machine operators and assemblers, cleaners and labourers. Higher wages continued to be the main motivation for them to work in the neighbour country, The Sun Daily reports.

“While this is a limited example, it does suggest that current wages in Malaysia may be too low to attract local workers. Employers may also be reluctant to increase them due to the presence and abundance of cheaper alternatives,” the article said.

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“So long as blue-collar wages continue to face downward pressures, employers will not be hard pressed to adopt productivity-enhancing measures. Consequently, Malaysia risks being trapped in a low-wage, low-skill conundrum.”

Further, the article stated that a high-dependence on low-skilled foreign workers will witness a decreasing volume owing to the case for automation, suppress overall wages, and deter adoption of productivity-enhancing efforts. Thus, this will hinder the creation of high-skilled jobs and adversely shapes Malaysia’s reputation as a low-skilled, labour-intensive investment destination.

Foreign workers remit a significant share of their income abroad, thus reducing spillovers in the domestic economy. Of the total outward remittances in 2017 which was at RM35.3 billion, the greater part was accounted for by foreign workers.

“While grants and incentives for automation and technology adoption are helpful, they are by themselves insufficient to create the necessary push for firms to move up the value-chain,” added the article.

It said Malaysia’s transition to a high-income and developed nation is at risk, as long as firms are still engaged on a “race to the bottom” in relation to labour costs and are unwilling to pay more, despite commensurable productivity gains they had adjusted.

Read also: National Wages Council Invites Public Feedback on Wage and Employment Issues

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