How to raise people’s income

Former PKR deputy president Nurul Izzah Anwar urged her father to prioritize structural wage reforms if he secures a second term as prime minister, and she is correct. Fortunately, the ingredients to raise wages and incomes are already available. The economy has been growing robustly at 5.7% during the first half of the year, employment levels have reached historical highs with 17.3 million people in the labor force, and unemployment is at a low of around 3%.

These provide a solid foundation for implementing structural reforms based on existing policy pillars. The first pillar is the minimum wage. The government is presently reviewing the RM1,700 minimum wage, with a budget of one million ringgit and the assistance of an external consultant. Historical data from similar initiatives suggests that a minimum wage of RM2,000, adjusted for the rising cost of living, should be the focus.

The impact of these wage increases on businesses should be minimal due to the current business environment, which is not facing financial difficulties due to rising operating costs or high fuel prices. Furthermore, only about two million people currently earn below the minimum wage, meaning the impact would be relatively limited.

Another solution to consider is the progressive wage model (PWM), successfully implemented for over 50,000 employees. This model can help address the remaining 2.95 million individuals within the PWM wage bracket by simplifying the process and eliminating unnecessary requirements. Direct income tax credits of RM200 to RM300 per month can also benefit middle-income groups.

The argument for a regional minimum wage based on state-level cost of living and conditions should be abandoned, as it would likely cause people from lower minimum wage states to migrate to higher wage states, adding unnecessary complications.