Government tends to imposed rules and regulations and makes it illegal to charge a price that is lower than a certain level. This situation is called as a price floor that is applied to a labor market. When the minimum wage is set above the equilibrium, it will occur unemployment. At the equilibrium price, it means that the quantity demanded and supplied of labor is equal. But, when the wage rate is above the equilibrium, unemployment occurs. This is because the quantity supplied of labor is more than the quantity demanded. This causes a surplus of labor.
There is an example of our Prime Minister Najib Tun Razak has set a minimum wage was fixed at RM900 for Peninsular Malaysia and RM800 for Sabah and Sarawak. This minimum wage is eligible for the cleaners and contract workers.
From the graph above, we can see that the minimum wage rate is set at RM900 for Peninsular Malaysia. Any wage that is set below
RM900 is illegal. We estimate that before the government set the wage rate, it
was RM700, and there are 21 millions of people are hired. But when the wage
rate has increased to RM900, 21 millions are hired, but there are 24 millions
are available. The numbers of employment are 3 millions.
The Human Resources Minister Datuk Seri Dr S. Subramaniam said a
minimum wage will encourage employers to hire Malaysians. By having a minimum
wage, employers do not need to pay levies and agency fees. Besides that, the minimum
wage can reduce the dependency on foreign workers in the long term. He also
hoped that it would change the perception of some Malaysians towards some jobs,
like the construction sector.
Minimum wages can also
benefits in many ways. First of all, the higher the wage rate, the more the
workforce will benefit from it. It will also be a boost to economy. Next, the
higher the wage will also benefit the workers as the higher contributions to
the Employees Provident Fund (EPF) and there will be extra saving for
retirement in Malaysia. Additionally, a higher wage rate can also allow workers
to enjoy a higher base salary. The increased incomes will satisfy the
requirements of bank under the new reading guidelines. Banks will look at the
salary and depends whether the person can afford the loan.
In my opinion, minimum wage can also help
families. This is because people work to fulfill their needs and also to take care
of their own family. Without a minimum wage, all these workers might forces to
work for less money and they cannot take the responsibility to take care their
families. Besides, minimum wage can also help businesses to plan their budget.
Without minimum wage, it might be difficult for companies to plan the budget
that they need to pay for their employees.
Furthermore, it can also increase our countries
economic. For example, if there is no minimum wage, the employees can only get
RM700. This will cause them to spend very carefully. They need to consider more
before they spend their money. But if the government imposed the wage rate to
RM900, consumers will tend to spend more, because they have a higher wage. This
can increase the purchasing power, while the country’s economy will also
increase.
Apart from the benefits, there are also
disadvantages of minimum wage. The major reason will be increasing the
unemployment rate. This is because when the government increases the wage rate,
there are more workers willing to work for a higher wage rate. But
unfortunately, there are only limited workers for employers to employ. This
will cause unemployment. Next, it is harder for those workers that do not have
skills. This will cause them to be difficult to complete with those skilled
workers. Minimum wage can also lead to more black markets in the country. It is
because employers tend to avoid the minimum payments to the employees. For
example, if a small company cannot afford to pay the minimum wage that set by
the government, they might need to find someone that willing to work below the
minimum wage. This is an illegal activity, but they might do it secretly, as
the report of the wages will not be reported.
The poor people do not get any benefits from the
minimum wage too. The limitation of minimum wage does not increase the incomes
for the lower income group. The reason is because they used to rely on
benefits, therefore they are not affected by it.
The minimum wage is not fair for Sarawak. This is
because the cost of living in Sarawak was 15% to 25% higher than Peninsular
Malaysia. It emphasized that the rate of Sarawak is tower because the employers
have lower ability to pay than those in Peninsular Malaysia.
The minimum wage also encourages teenagers to
drop out. Most people always think that teenagers should always be in school,
colleges or universities. They shouldn't be working at this age. But there are
students that stop studying after their high school, as their parents do not
have enough savings to allow them to continue their study. That is why minimum
wage should also set for students so that it is fair for them.
Recently, there is an example in Milwaukee,
ow-wage workers, union members and community activists joined a National Day of
Action to raise the minimum wage. It stated that women also deserve to have an
acceptable and higher wage. This is because they need to take care of their own
families and even pay the bills. It is unfair for them to have such a low wage
rate.
In conclusion, it is important to have minimum
wage so that the workers can get an acceptable wage rate between their working
hours. But, the minimum wage can also cause problems like unemployment, unfair
to the unskilled workers and more. That is why government should consider
wisely on how to impose the minimum wage and create fairness to everyone.
Serene Phua Sweet Ling
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