The right approach for a progressive wage policy to boost labor productivity growth in Malaysia — World Bank Economist

KUALA LUMPUR (April 25): The government’s move to introduce progressive wage policies is the right approach to boost labor productivity in Malaysia, according to World Bank economists.

Dr Matthew Dornan, Senior Economist for Social Protection and Employment in East Asia and the Pacific at the World Bank, said: “Slower wage growth is one of the main issues contributing to lower labor productivity.” Ta.

“We are waiting for a pilot project.” [for progressive wage policy] to see what impact it might have [on the labour productivity]. “This is an important reform and the right approach,” he said. ladder The move coincided with the launch of the World Bank’s 29th Malaysia Economic Monitor “Bending the Bamboo Shoot: Strengthening Basic Skills” on Thursday.

Labor productivity growth fell to a pre-pandemic low of 0.5% in the fourth quarter of 2023, compared to 3.7% in the same period last year, the World Bank said, citing the Department of Statistics Malaysia (DOSM).

According to DOSM data, labor productivity growth in manufacturing was negative at -3.2% compared to 1.6% in the fourth quarter of 2022. Growth in the construction sector fell to 2.4% (from 10%), and growth in the services sector also fell to 1.2% (from 4.1%).

The government’s Progressive Wage Policy White Paper released in November last year suggests that the policy will apply to formal sector workers with a monthly income of RM1,500 to RM4,999 in the first year. This provision is expected to affect at least 4 million salaried workers.

Economy Minister Rafizi Ramli said in a speech on Thursday that the government will start registering the pilot project next month, with 1,000 companies from various sectors expected to participate. The pilot project is expected to be completed in September.

Dornan said that in addition to low labor productivity growth, labor market challenges include underemployment of highly educated workers who face a skills mismatch as levels of expertise do not match job demands. highlighted other challenges in

According to World Bank data, time-related underemployment was 1.1% and skills-related underemployment was 37.4% in the fourth quarter of 2023. Underemployment associated with advanced skills suggests that there is a mismatch between the demand and supply of highly educated workers.

Mr Dornan said that although Malaysia had made some progress in increasing women’s labor force participation over the past decade, the gender gap between men and women remained large, pointing out that there were still challenges in achieving gender equality in the workforce. did.

The labor force participation rate for men was 83% in the fourth quarter of 2023, while the participation rate for the opposite sex was only 56.3%, he added.

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