If you can’t beat them, join them. At least that’s what the government wants employers to think.

The battle between employers and employees rages on. In Malaysia, that is no different from the rest of the world. This time, the government is getting into the mix by proposing a progressive wage policy.

So what is this? It tries to incentivise employers to increase their employees’ wages if they have shown that they are getting more productive or contributing more to the company. First of all, this is not a minimum wage policy. A minimum wage policy is geared towards increasing the basic wage for the bottom earners where employers have more power to pay a lower wage. The main difference here is that the progressive wage policy is aimed towards semi-skilled and skilled workers.

The main problem the government has is that the share of the revenue and profits seems to have favoured employers in recent years. The wage share ratio to earnings (which measures how much profits are being spent on wages) has dipped to 32.4% in 2022 from 37.2% in 2020. This is a slow-boiling time bomb for any government in power as future political discussions will surely revolve around the concepts of wage fairness.

So what is the principle of a progressive wage policy then? The government has this to say.

“The policy will be voluntary in nature, incentive-based and linked to productivity,”

This doesn’t tell us much about the policy. All we know at this point is that employers are not ‘forced’ to abide by this policy which I argue “What’s the point then?”. In policy talk, there’s a concept called the carrot and the stick. The government is leaning towards the carrot for sure, but it needs to have a strong stick at its core. If not, I think this might just be ‘talk’.

As for the implementation, it is probably the case that the government will provide some cash incentive for employers to increase wages for their workers based on ‘productivity’ which to be honest, is so vague. However, something is better than nothing. Singapore has proven that it could implement such a policy effectively. But as the saying goes, everything works in Singapore. It’s an island nation anyway.

Why it matters for you: This might work out well for you if the government manages to ‘convince’ employers to give up some of their profits to pay you more. Unfortunately, I think human nature is still strong in this one. Why would you give up your profits for something uncertain?