Living Wage Drive By GLCs, GLICs A Pivotal Step Towards National Wage Reform – Economists

By Nurunnasihah Ahmad Rashid

KUALA LUMPUR, July 2 (Bernama) -- The move by Government-linked Investment Companies (GLICs) and Government-linked Companies (GLCs) to implement a minimum monthly living wage of RM3,100 for 153,000 employees marks a highly significant milestone that can catalyse a broader wage reform across Malaysia’s labour market, according to economists.

Besides raising productivity, the unprecedented move could also boost domestic consumption, improve socio-economic outcomes for Malaysians and raise the country’s economic resilience.

Prominent economists Dr Nungsari Ahmad Radhi and Sunway University economics professor Dr Yeah Kim Leng concur that while the figure represents a small share of Malaysia’s 12-million-strong workforce, the initiative could serve as a benchmark for other large employers, particularly those listed on Bursa Malaysia Bhd.

“This is a good initiative by these companies, which are typically large listed firms. Employers of this size should pay decent wages,” Nungsari told Bernama.

He said the move could also improve labour market competition for talent while pushing companies to enhance productivity through training and personnel development.

Echoing this view, Yeah said the commitment by GLICs and GLCs could give impetus to national wage reforms aimed at addressing the country’s long-standing depressed wage levels.

“It also supports Malaysia’s goal to raise the share of employees’ compensation to 35 per cent of gross domestic product (GDP) as targeted under the 12th Malaysia Plan,” he said.

The initiative is part of the broader Government-linked Enterprises Activation and Reform Programme (GEAR-uP), launched in 2024 by the Ministry of Finance to realign the role of GLICs and GLCs with the national development agenda. 

The programme, which includes commitments on catalytic investments, community upliftment, and talent development alongside the wage reform, has so far mobilised RM11 billion out of RM25 billion pledged by GLICs, with a focus on high-value, high-growth sectors and improving socioeconomic outcomes for Malaysians.

Yeah noted that the wage adjustment, ranging between RM100 to RM300 monthly per employee, could translate into RM200 million-RM500 million in additional employee compensation annually. 

“This increase in disposable income is expected to boost domestic consumption and strengthen Malaysia’s economic resilience,” he added.

However, both economists also pointed out that replicating the wage policy across the private sector —particularly small and medium enterprises (SMEs) — presents a different set of challenges.

“SMEs have different cost structures and competitiveness levels. While some may be able to adopt such wages, many others may not. It depends on their financials,” Nungsari said.

He stressed that broader wage reform would require more firms to become regionally competitive, innovate, and tap new markets to earn better margins and afford higher wages.

“The fundamental shift will come from supporting new firms doing new things. That is where another component of GEAR-uP — risk capital for new ventures — can play a transformative role,” he added.

On the policy front, Nungsari emphasised that government support should focus on setting appropriate minimum wage levels, improving education outcomes, and incentivising firms that invest in productivity enhancement and technology adoption. 

He said clear foreign labour policies are also essential to avoid distorting incentives for automation and higher wages.

Meanwhile, Yeah noted that wage increases must be accompanied by sustained improvements in productivity and efficiency. 

“The increase in labour costs will motivate GLCs to find innovative ways to raise revenue and competitiveness.

“With adequate compensation and higher morale, employees are likely to respond positively,” he said.

Both economists agreed that the initiative aligns with the MADANI Economy framework, particularly its goals to enhance labour’s share of income and promote inclusive prosperity.

“This reflects the influence of statutory funds — Khazanah Nasional Bhd, the Employees Provident Fund, Permodalan Nasional Bhd and the Retirement Fund (Incorporated), among others —on investee companies to lead by example.

“But for this momentum to spread beyond the GLC ecosystem, Malaysia must embrace risk-taking and tolerate failure to build competitive firms capable of sustaining higher wages,” said Nungsari. 

-- BERNAMA

TAGS:
NR MR NII