In accordance with global May Day celebrations, the Southeast Asian nation of Malaysia has introduced a minimum wage for the first time, following a decade of pressure by labor unions.

"The introduction of the minimum wage is a historic moment for Malaysia," said Prime Minister Najib Bin Abdul Razak, who is seeking the support of the poor and working classes, ahead of expected elections.

"The lowest-paid will now be guaranteed an income that lifts them out of poverty and helps ensure that they can meet the rising cost of living."

Under terms of the new law, workers in Malaysia's private sector will get a minimum salary of 900 ringgit ($297) per month, while laborers in the poorer, outlying states of Sabah and Sarawak on the island of Borneo will receive 800 ringgit ($260) monthly.
Businesses will have up to one year to adjust to the new payment system.

The Kuala Lumpur government estimates that about one-third (34 percent) of Malaysian workers earned less than 700 ringgit per month as recently as 2009, meaning that the new wage scheme will lift many of them out of poverty.

Like us on Facebook

But some critics complain that the minimum wage will hurt small business owners and the country's competitiveness.

"Local employers have been vocal in their opposition to the introduction of a minimum wage," said Fung Siu, deputy product head for country forecasting services for the Economist Intelligence Unit (EIU).

"The Small-Medium Industry Association of Malaysia (SMIAM) claimed in March that a minimum wage of 800 ringgit ($260) per month [would lead] a large number of its members to face bankruptcy. The association stated that the worst-hit would be micro-small and medium-sized industries, which employ around 4-million workers and tend to have profit margins of only 3-5 percent."

Siu also noted that a separate organization, the Malaysian Employers' Federation, warned in March that up to 200,000 companies would find it difficult to continue operations under a uniform minimum wage.

"Employment in the commodities sector has always been vulnerable to global price developments," she said.

"The introduction of a minimum wage may have modest impact on employment levels in this particular sector when the global prices of such commodities, such as palm oil, is high, but will have a detrimental effect if global prices suffer a sharp fall."

Shamsuddin Bardan, director of the Malaysian Employers' Federation, told the BBC: "The 900-ringgit level is too high for those in small towns and remote villages," adding that wages in places like Sabah and Sarawak could climb by as much as 90 percent, thereby increasing the cost of doing business.

"We feel the situation will be better managed if wages are linked to productivity and skills of employees," he added.

Moreover, the opposition Democratic Action Party (DAP) has also criticized the minimum wage law, according to the Malaysian Insider newspaper.