The Progressive Wage Policy (PWP) and the increase in the minimum wage to RM1,700 per month represent a crucial step in enhancing labour productivity in Malaysia in 2025.
This initiative is part of the Madani Economic Framework, which aims to achieve a more equitable income distribution and ensure that workers receive a dignified wage.
Raising the minimum wage to RM1,700 per month is a significant measure to ensure that workers are paid fairly in line with their efforts and productivity. This move is expected to boost worker motivation, which in turn will enhance labour productivity. When employees feel valued and receive a fair wage, they are more likely to work harder and more efficiently.
Additionally, the increase in the minimum wage is expected to help reduce poverty among workers. With higher wages, employees will have more financial capacity to meet their basic needs, such as food, housing, and education. This will improve their quality of life and alleviate financial stress. When workers no longer have to worry about their basic needs, they can fully focus on their jobs, ultimately contributing to higher productivity.
The PWP also aims to narrow the income gap between low- and high-income workers. By ensuring that all employees receive fair compensation for their work, the policy seeks to create a more just and balanced labour market. This will foster healthy competition among workers and employers, further driving labour productivity.
The implementation of the PWP and the increase in the minimum wage are also expected to attract more foreign investment to Malaysia. By ensuring that workers in Malaysia receive fair wages, the country will be viewed as an attractive destination for foreign investors. These investments will bring in new technology and knowledge, which will further enhance labour productivity in Malaysia.
However, the implementation of the PWP and the minimum wage increase also comes with challenges. One major concern is that higher wages may raise operational costs for employers. This could lead to some businesses to reduce their workforce or relocate operations to countries with lower labour costs. To address this challenge, the government should provide incentives and support to help employers adapt to the wage increase.
Moreover, the government must ensure that the implementation of the PWP and the wage hike is carried out in a transparent and fair manner. This includes ensuring that all employers comply with the established regulations and do not exploit the situation by cutting other employee benefits. The government should also provide channels for workers to report any injustices they face.
The minimum wage increase is also expected to boost workers’ savings rates. With higher wages, employees will have more disposable income to save, leading to greater financial stability and more financial choices. Higher savings rates will also benefit the national economy as they will increase the amount of money available for investments and expenditures.
Furthermore, raising the minimum wage will encourage competition among workers. With better salaries, employees will be more motivated to enhance their skills and productivity to remain relevant and competitive in the job market. This will encourage continuous learning and skill development, ultimately improving overall labour productivity.
The PWP and the increase in the minimum wage to RM1,700 per month are essential and necessary steps in boosting labour productivity in Malaysia. This initiative is expected to enhance worker motivation, reduce poverty levels, narrow income disparities, and attract more foreign investment.
The wage increase is also anticipated to improve workers’ savings rates, which will, in turn, benefit the national economy as a whole.
Dr Cheah Chan Fatt is a Research Fellow at the Ungku Aziz Centre for Development Studies (UAC), Universiti Malaya.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
