Question

QUESTION 4

Case Study (Floor Price/Ceiling Price)

Kuala Lumpur, 30 October 2015: New private sectors are not to defer the payment of
minimum wages, scheduled for July 2016. Therefore, employers have to comply with the
minimum wage ruling without giving any more excuses, said Datuk Seri Richard Riot, the
Human Resources Minister. He mentioned that “There is no turning back on this policy”, as
the national minimum wage was introduced three years back. He said this in his speech which
was read out by Datuk Seri Saripuddin, the ministry secretary-general, at an official
ceremony held for the new National Wages Consultative Council and National Wages
Consultative Committee programme.
The minimum wage, as set in Budget 2016, increased from RM900 to RM1000 for the
private sector in Peninsular Malaysia and from RM800 to RM920 for Sabah, Sarawak and
Labuan. This would be followed by an announcement on the standardized minimum wage
rate. “Several clauses of minimum wages for those paid daily, piece-rated and related matters
will be included in a new Order. The fine details of the cabinet‟s decision will be forwarded
to the National Wages Consultative Council secretariat soon,” said Riot. He also added that
the increase in minimum wages could help to improve the people‟s livelihood, which is the
government‟s commitment.
“We hope the council members will continue to discuss this matter, and to consider the
national interest as the minimum wage policy is an intervention to turn the country into a
developed nation by 2020,” he said.
According to Riot, as of August 2015, 182 employers had been charged in court and action
taken against 122 for failing to obey the minimum wage ruling. After much discussion in the
Cabinet, it is a balanced approach taken by the government based on recommendation given
by the council members, World bank and other stakeholders.
Datuk Seri Saripudin mentioned at a press conference later that there was ample time for the employers to be prepared financially for this change in the minimum wage structure. “The
rates set is acceptable and fair to all”, he added. According to Tan Sri Azman Sha Haron who
was also present, the minimum wage did not differentiate between local and foreign
employees. The president of the Malaysian Employers Federation further commented that there was concern about a large sum of money going out of the country, due to the minimum
wage.

Questions:

i. What is minimum wage? What kind of price control is it known?

ii. How much is the minimum wage in 2015 and 2016?

iii. With the aid of diagram, explain the concept of minimum wage.

iv. Explain the advantages and disadvantages of the imposition of minimum wage.

Answer 1