KUCHING: The Human Resources Ministry and the Economy Ministry are collaborating to develop a framework that will ensure Malaysians receive pay raises proportionate to the increasing cost of living.
This solution is one of many being developed to address the cost of living, according to Economy Minister Rafizi Ramli.
He added that his ministry is working with the Human Resources Ministry to create a framework for more consistent and inclusive salary development in Malaysia.
“This is the first time in the nation’s history that an administration has made an effort to develop a clear compensation increase framework that includes all workers. One of the main focuses of economic planning in future Malaysia Plans will be on salary and income growth,” he told reporters yesterday.
Although the minister did not provide further details, he did confirm that the framework was still being developed.
“I strongly believe that staff annual salary increases should be based on the increase in consumer price index, the staff’s level of competency and skills in performing their work. The final salary increase should be the increase in CPI plus the staff’s various competency skills plus the company’s agreed increase,” said Sarawak Patriot Association (SPA) Chairman Datuk Dr Lau Pang Heng.
He stated that the salary growth framework should be based on CPI, staff competency skills, education, and the prevailing environment.
Lau expressed concern about how to quantify competency skills without a competency framework within the organization, how to determine what is needed to progress to the next level without detailed skills assessment, and how to pay staff fairly and accurately.
Employers should focus on areas and objectives of the organization and its staff while also considering their attitudes, abilities, and actions towards their work.
“There is no problem with paying a good salary to high-performing staff, and continuous training is needed for low-performing staff to cope with their job demands and competencies,” he said.
He urged that male and female workers receive equal pay for the same job. Salary should be the same for urban and rural staff, and the salary given should be based on a staff’s competency skills.
A staff member with a higher level of competency skills who can perform their work efficiently should receive a higher salary.
“A methodical and quantifiable process brings inherent fairness. This fairness helps with challenges such as the gender pay gap, which is less likely to arise.
“The competency skills framework needs to be implemented in an organization so that staff performance can be measured based on their competency skills fairly, accurately, and without bias.
“A real CPI measure should be used to obtain the actual cost of living increase. By a real CPI measure, it means a CPI survey that incorporates a wider range of consumer goods rather than being limited to the restricted list of consumer goods set by the Department of Statistics,” Lau said.
Dr Dzul Hadzwan Husaini, a Senior Lecturer at Universiti Malaysia Sarawak’s Faculty of Economics and Business, stated that the cost of living began to strain households when price increases exceeded income increases.
“It is difficult for the production sector to commit to a wage increase if their marginal revenue is not long-term viable, especially in this situation where we are facing economic pressure from both internal and external sectors as a result of multiple global crises such as the COVID-19 pandemic, the war in Russia-Ukraine, and so on.
“We must agree that both the public and private sectors of production are confronting uncertain cash flow as a result of the losses incurred by MCO over the last two to three years,” he said.
Apart from that, he also commented that the private sector struggles to offset its losses when we reach an endemic phase. The same is true for the public sector, which must reduce the national debt ratio.
The banking industry must also raise interest rates to ensure that our capital and money markets remain competitive both domestically and internationally.
These are some of the reasons why the cost of living has begun to rise significantly, putting a strain on households. Producers have no alternative but to raise market prices to make reasonable marginal revenue to survive, particularly in the post-COVID 19 era.
Wage increases at this time will likely raise production costs even further. However, I believe this effect is only transitory,” he added.
“Hence, the government must find a balance between the interests of producers and households. To improve government revenue, the tax system must be upgraded.
“An efficient tax system will improve the country’s fiscal status, which will, in turn, increase the government’s capacity to assist producers and households in the face of internal and external shocks.
“More incentives should be provided to producers during specific time periods, particularly now. This gives producers more financial flexibility to contemplate raising wages for workers.
“It could be a tax rate reduction to reduce their costs. Even though this option may reduce government revenue, it can be offset by implementing a more effective tax system, such as GST. The GST rate, on the other hand, should begin at a lower rate.
“Our market framework must also be reformed by the government. Large corporations should not be allowed to dominate the market for numerous goods. The market will become inefficient as a result ofthis circumstance, driving prices higher than the market price and contributing to the rising cost of living,” he said.
Dr Husaini emphasized that salary growth should be equivalent to productivity growth, and producers should not be forced to raise wages without considering worker productivity.
Higher productivity is necessary to ensure that producers can make reasonable marginal revenue, which can be used to pay salary increases each year.
In summary, the Human Resources Ministry and the Economy Ministry are working together to develop a framework that guarantees Malaysians receive pay increases proportional to the rising cost of living.
The framework should be based on CPI, staff competency skills, education, and the prevailing environment, and a methodical and quantifiable process should be implemented to ensure fairness and accuracy.
To address the rising cost of living, the government must find a balance between producer and household interests, improve the tax system, and reform the market framework to prevent monopolies and oligopolies from dominating the market.
Salary growth should be equivalent to productivity growth to ensure that producers can make reasonable marginal revenue, which can be used to pay salary increases each year.
