KUCHING: The proposal to raise the wage share ratio from 32 per cent to 45 per cent using the Progressive Wage Model (PWM) has sparked discussion on its feasibility, considering the potential effects on employers.
To explain, the wage share ratio shows how income is split between workers and other factors like capital put into the business.
A high wage share ratio means workers get a big chunk of the national income, while a low ratio means more money goes to other parts of the business instead of workers.
This ratio can change over time, depending on how businesses operate.
Universiti Malaysia Sarawak (Unimas) economist Jerome Kueh said to make this work, there needs to be a balance.
“Both labour and capital-heavy sectors should be considered. Also, there must be a big push in how productive workers are.”
Furthermore, in the face of guaranteed annual pay raises, workers could become complacent and may lower their performance standards if they are not encouraged to excel.
Kueh argued that for workers to earn more, the economy must be doing well.
“When the economy is doing great, there are more investments and businesses grow. This lets workers earn more,” he told New Sarawak Tribune recently.
He went on to compare different countries.
“Take Indonesia and Vietnam for instance,” Kueh pointed out. “These countries have a higher focus on manpower. Because they have a lot of people in various jobs, they tend to attract more investments. This leads to a higher wage share ratio.”
He contrasted this with countries that lean heavily on technology.
“Now, if you look at a place like Singapore, they are more tech-driven. Hence, their ratio is on the lower side,” Kueh explained.
The proposal was announced by Prime Minister Datuk Seri Anwar Ibrahim following a recent National Economic Action Council (MTEN) meeting in Putrajaya.
Anwar said the government wants workers to earn more and seeks a fairer method of distributing wages.
However, Kueh contended that paying more is not the only answer.
“If we pay more, businesses need to make sure they are getting good value for that money. This means workers need to produce more,” he explained.
He also said that businesses must match the right jobs with the right people and should address unemployment and train workers better.
“Talks between business owners and workers are key. This helps balance better wages and increased output,” he added.
But, there are some challenges. One is rising prices.
“If wages go up, things might become more expensive. This means even though people earn more, they might not be able to buy more.”
Still, Kueh said if businesses are more productive, this can balance out the price rises.
Another challenge is adopting more technology and automation.
“As businesses use more tech tools, the skills workers need will change,” he said.
These changes could affect business profits, especially if wages are high.
Kueh also discussed small businesses.
“For many small businesses, paying higher wages might be hard. Only those with strong financial backup will manage the higher costs,” he said.
