Having worked in human capital development at a national level before in my government and international consulting days, it isn’t easy to properly balance human capital development policies given how cross-cutting the factors that affect a nation’s human capital. There are many things a country must consider when planning its human capital development.

One way I have developed to think about it:

1. Areas of human capital support systems: this includes social protection systems – EIS, PERKESO coverage of injuries etc; #CareEconomy (following the latest buzzword) – childcare, family arrangements & household work burdens etc. 

2. Areas of human capital planning for economic productivity: This involves issues like fertility, ageing nation, upskilling, digital transition, intergenerational workforce transitions etc.

3. Areas of human capital quality and retention: this includes your wages and benefits, brain drain and types of jobs – high skill vs low skill and high income vs low income (Note income and skill level don’t necessarily correlate as that depends on the country’s economics)

There may be others, but this is how I view things broadly.

To what extent do you take interventions in these areas utilising human capital policies demand a great understanding of the country’s landscape and peculiar challenges? All too often, we follow the best practices of foreign countries that are at different stages and have different needs and strategies.

Coming to the Progressive Wage Policy. 

The Progressive Wage Policy is one of the government’s strategies to increase the wages of middle-income workers, thereby enhancing the employee compensation (CE) share within the remaining period of the 12th Malaysia Plan and the next 10 years.

Most people don’t realise what a game-changer this policy is. 

This policy tackles very directly our issues on human capital quality and retention. How do you ask? It entices local companies who never had much incentive to raise wages with a carrot incentive!

Here are some interesting points regarding the Progressive Wage Policy:

1. The three fundamental aspects of the Progressive Wage Policy are: voluntary, incentive-based, and linked to productivity.

2. This policy is for the SME sectors, whereby they will be given subsidies and incentives to cover the salaries of their staff.

3. The policy only permits local companies to apply if they are willing to adhere to the suggested wage increment rate guidance.

4. The policy aims to ensure that workers receive systematic and continuous wage increments.

5. As productivity is one of the fundamental aspects of the policy, the upskilling of workers will also be a focus to enhance the productivity of both companies and Malaysia as a whole.

With all these interesting points of the policy, the ultimate goal is to reform wages in Malaysia to improve the labour market ecosystem.

This is important as Malaysia has decided that we want to be a top R&D producer utilising local talents and companies to bridge the middle-income trap. In other words, we want our human capital ie the Rakyat to be more innovative and have better salaries whilst moving the country’s economy up the value chain. To be a country that doesn’t just consume technology and products but also makes them. Let’s be frank. A big part of achieving this is primarily by ensuring better wages to keep the right talent ( I acknowledge that today aspects of quality of life are also becoming more emphasized as well).

Why is it more crucial today and why the Government roll out must consider the strategic sectors?

The recent China-America trade war and its impact on the semiconductor industry is a good example of why this policy needs to exist. Malaysia is one of the few places aside from Taiwan, China and America that has a somewhat vibrant semiconductor industry.

However, our local companies of course don’t pay their employees MNC rates as it is. In the current climate, where the trade war is fueling the demand for talent,  our local talents are being poached left right and centre by MNCs both here and overseas who are doubling and tripling salaries making it almost impossible for the employees to say no. While good for them, this is bad for the local companies and ultimately the country as we are losing our technological production capabilities.

So imagine with this policy now, we are laying the foundation to make sure we have a carrot and not a stick to ensure fair and equitable pay rises for employees without hitting too hard on the employers. This policy is optional, unlike minimum wage. That’s where it’s fantastic.

I sincerely hope the Government can also look into two additional suggestions I have raised in the past:

1. CEO Pay ratio disclosure in Annual Reports of publicly listed companies

2. Salary transparency laws as part of the Employment Act

See the details here in my previous post: https://www.linkedin.com/posts/amirisyam_costofliving-inequality-minimumwage-activity-7022139977975164928-L1nB?utm_source=share&utm_medium=member_desktop

If these also come to pass alongside progressive wage and minimum wage, we will see wages rise in Malaysia to a point where breaking the middle-income trap is possible. We will no longer be known as that country that does not pay our employees fairly. 

Is the Progressive Wage Policy the game-changer human capital policy Malaysia needs?

Yes, I believe so, but it will hinge on the implementation and execution of the policy.

I look forward to the presentation of the Progressive Wage Policy White Paper in the Dewan Negara on 14 December 2023 (tentative) and am looking forward to working with my client, YB Senator Datuk Seri Zurainah Musa to question how this policy will be rolled out and implemented to its best effect.

Ultimately, this is about making our Country more competitive and our Rakyat more prosperous. Kudos to YB Rafizi and the Kementerian Ekonomi team for this.

PS: If any of you are working in the human capital development space and would like to engage and brainstorm, please do reach out. Happy to engage and share insights as I have always been fascinated by these topics.