Hourly-Based Minimum Wage Best for Bosses & Workers?
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An economist has advocated that Malaysia switch to an hourly-based minimum wage system rather than a monthly-based system, claiming that it is better for both employees and employers.
Better work-life balance for workers?
Firdaos Rosli, the chief economist at MARC Ratings Bhd, stated that an hourly-based minimum wage allows workers, particularly those on low incomes, to maximise their profits.
He provided an example of a worker earning the minimum wage. If the worker wishes to improve their productivity by working extra hours throughout the workweek, their wage would still be at RM1,500 since it is the contracted amount.
In response to the increased minimum wage, he said that with an hourly-based salary rate, the employee can put in extra hours over the week to earn more, meaning that an hourly rate can improve the employee's ability to earn.
According to Firdaos, the hourly-based minimum wage rate would also enable workers to achieve a better work-life balance as they can work fewer than 40 to 45 hours per week while still receiving a minimum pay.
He said that for employers, an hourly-based minimum wage would be more cost-effective as they can afford to pay workers less than RM1,500 but still comply with employment law.
Australia (A$14.54), New Zealand (NZ$13.18) and the United States (US$7.25) are some of the developed countries that practice the hourly-based minimum wage system.
Will it lead to wage suppression?
According to Malaysian University of Science and Technology (MUST) economist Geoffrey Williams, the hourly-based minimum wage concept has both advantages and disadvantages.
On one hand, he argued that an hourly-based minimum wage model would provide better flexibility to both companies and employees. It can help in budgeting for companies to keep wage costs manageable, and they can release workers who work shorter hours so they can also work for other employers.
However, he explained that it depends on flexible working relationships and contracts to enforce, like a type of a gig economy where the minimum wage is guaranteed.
Williams stated that one of the disadvantages of the hourly wage model is that it may lead to wage suppression. He said that the disadvantage of this flexibility and hourly-based wage model is that hours can be cut, sometimes arbitrarily.
He added that the take-home wage would be under the minimum wage and workers would be in poverty-wage conditions with uncertain wages and hours every week or even each day, which would defeat the social safety net objective of the minimum wage.
Source: FMT