Economy Minister Rafizi Ramli (source: thestar.com.my)

Kuala Lumpur – The Malaysian government will introduce a new programme to raise wages for low-income workers as the Southeast Asian country is grappling with rising living costs and growing inequality.

The Progressive Wage Policy, under which employers would gradually increase pay for their workers based on their skills, experience and performance, will start in June 2024 and involve 1,000 companies in a pilot project.

Economy Minister Rafizi Ramli said that the Malaysian Government will spend 2 billion RM (430 million USD) for the new policy, which is expected to benefit 1.05 million workers.

Unveiling the plan last week, he told the parliament that Malaysia's salary statistics showed 47 per cent of the country's workers earned less than the poverty line of 2,589 RM (550 USD) a month in the first quarter of 2023.

He said low wages have serious implications for the livelihoods of workers in the country, with a major portion of their salary spent on basic needs and little savings

The wage policy, which is targeted at the small and midsize businesses that account for the vast majority of Malaysia's workforce, will be implemented in stages and is meant to complement the existing minimum wage policy.

Malaysia introduced the minimum wage in 2012 and has since increased the floor on pay for workers in the lowest category. The current minimum wage is 1,500 RM per month. But Rafizi said the policy has also led to wage compression over the years, causing pay among skilled and semi-skilled workers to stagnate.

The World Bank's Malaysia Economic Monitor report in October pointed out that the wage gap between low-skill and high-skill workers has widened over time, rising 37.4 per cent from a gap of 1,800 RM per month in 2010 to 2,474 RM in 2021. Annual real wage growth in Malaysia between 2011 and 2021 was 2.4 per cent, compared with 3.1 per cent in Thailand and 4.0 per cent in Vietnam.