Minimum wage should be tied to productivity: MIDF Research

KUALA LUMPUR (May 2, 2012): The minimum wage policy should be tied to productivity growth, says MIDF Research.

Source From (The Sun Daily): http://www.thesundaily.my/news/367088
Posted on 2 May 2012

It said it would be hard to quantify the trade-off between addressing poverty and raising unemployment, and the net results could vary across the country.

"But by looking at previous studies, it suggests that the impact on employment is not substantial and that by having minimum wage it tends to reduce poverty.

"Obviously, we would prefer wage hike to be associated with productivity growth, which will be a slower process," MIDF Research said.

The research house said although the introduction of the minimum wage should help improve the living standards, the concern was whether such a policy could end up pricing some workers out of the market.

"There are possibilities for some businesses to reduce employing workers unless it is profitable to do so cannot be ruled out.

"Also, there will be some workers who are not productive enough to justify the new minimum wage rate will enjoy it," it said in a research note.
More objectively, it said the minimum wage policy would indirectly boost local demand for some products and services.

"While most businesses will face greater labour costs, we hope higher domestic demand can help improve the production cost by achieving greater levels of economies of scale, which we believe will take some time," it said.

The research house expected some businesses to try to look at all opportunities to pass on the cost, that would exert the domestic prices of goods and services.
"Nevertheless, we are reiterating our 2012 inflation forecast of 2.5% to 2.7% and 2.5% for 2013," it added. – Bernama