MALAYSIA’s minimum wage has jumped 9.1%, placing it 20th among 54 countries that have increased such pay, according to e-commerce firm Picodi.com.

In a report released on Monday, it said the minimum monthly net pay for a full-time employee stands at RM1,059.95 this year, compared with RM971.65 last year.

Picodi, a Polish company, said its calculations were based on the latest minimum wages compared with the rate applicable for 2019.

Malaysia’s minimum wage last year was RM1,100, an increase from RM1,000 in the peninsula and RM920 in Sabah and Sarawak in 2018.

It is still RM1,100 until February 1, when a rate of RM1,200 comes into force, but only in 56 urban and municipal council areas.

Picodi said in percentage terms, Malaysia is ahead of Hong Kong (8.7%), the UK (4.8%) and South Korea (2.5%), although these three countries pay higher minimum wages in terms of value.

The Malaysian minimum wage converts to US$255, compared with US$958 in Hong Kong, the UK (U$1,531) and South Korea (US$1,390).

Minimum wage and food prices

When tested against food prices, the report said Malaysians would need to pay RM343.87 for eight basic food items in a shopping basket covering the basic nutritional needs of an adult.

The items are bread, milk, eggs, rice, cheese, meat, fruits and vegetables, based on their prices this year.

Picodi said it gathered data on food prices in Malaysia from numbeo.com, where information is contributed by internet users.

“The basic shopping basket made 32.4% of the minimum net pay. With last year’s prices, the same products made 37.2% of the minimum wage at that time.

“It means that in Malaysia, the increase in wages outran the increase in prices.”

What’s the reality?

The report should not distract from the real debate over Malaysia’s minimum wage and whether it is really enough to meet the cost of living, said Professor Dr Rajah Rasiah of the Asia-Europe Institute.

He said the study should have adjusted the regional deviations of the prices of goods, as well as the share of disposable income that goes towards food purchases.

“If these things are addressed, then yes, one can claim that wages in Malaysia grew faster than food prices, which, with other variables constant, would translate into improvements in real wages.”

On whether the current minimum wage is enough to pay for the cost of living, the economist said the RM980 poverty-line income set in 2018 has been the yardstick since 1970.

The amount, he said, is too low and does not take into account improvements in living standards and larger households since then.

“The current use of four members per household seriously distorts reality, as poor households are known to have a larger household size.”

Rajah said Malaysia should use more accurate measurements such as the estimations by the Organisation for Economic Cooperation and Development (OECD), as suggested by Royal Ungku Aziz chair Professor Martin Ravalion, who has called for Malaysia to redefine its poverty line.

“Using the estimations of the OECD and Professor Martin Ravalion, the poverty-line income in 2018 should have been between RM2,500 and RM3,000.

“If we use this floor, then the incidence of poverty in 2018 should be 15% to 17%, rather than the official figure of 0.4%.”

If these standards were to be applied, he said, Malaysia’s minimum wage would be significantly low.

“After all, we only ranked 20th among the 54 countries listed (in the Picodi report).” – January 16, 2020.