WAGE AND GROWTH

RISING LABOR COST

• Labor productivity fall
• Unemployment-reach TP maximum
• Decrease in no of labor, increase in number of technology
• Minimum wage policy

INDUSTRIAL PRODUCT NOT COMPETITIVE

• Cost of production rise, production fall, manufacturing sector fall, competitiveness fall
• Exports fall, demand for domestic good fall, price rise
• Inflation happen
• Import will rise
• Import > export, balance of trade deficit

CONTINUED

• Currency fall, talent go foreign country work
• Import foreign labor
• R&D fall

INDUSTRIALIZATION PROGRESS

• Rising labor cost, cost of production rise
• Decreasing returns of scale
• Encourage growth outsourcing
• SME Fall
• GDP of manufacturing sector fall

CONTINUED

• Economic growth fall
• Middle income country

POLICY AND IMPLICATION

• Employment of Foreign Worker Policy
• Quite lenient in Malaysia
• The foreign workers willing to work at the lower wages compared to the local workers
• Implication : the firm can reduce the labor cost in producing industrial products by hiring the foreign workers at lower wages

POLICY AND IMPLICATION

• Minimum Wage Policy
• Implemented on 1 January 2013
• Set minimum wage
• RM900 per month (RM4.33 per hour) for Peninsular Malaysia
• RM800 per month and (RM3.85 per hour) for Sabah, Sarawak and the Federal Territory of Labuan

POLICY AND IMPLICATION

• Implication : may subject the firms to higher costs, especially those that have highly dependent on low-wage workers

REASONS OF LABOR COST RISING

• Labor shortage
• Small population in Malaysia
• Unbalanced involvement of labor in certain sectors
• Minimum wage policy
• Higher worker levies -Fringe benefits

BECOMING INDUSTRIALIZED

• Marginal productivity of labor
• MPL in comparison to wage
• Create knowledge
• Acquiring know-how

FUTURE IS BRIGHT

• More multinational companies
• Higher social culture
• More outstanding individuals