4 Ways Progressive Wage Model Benefits Malaysian Employers

4 Ways Progressive Wage Model Benefits Malaysian Employers

4 Ways Progressive Wage Model Benefits Malaysian EmployersLast month, Economy Minister Rafizi Ramli said that the Cabinet had passed the Progressive Wage Model policy and that the details would be presented in October during the Budget 2024.

The wage model should be running by April or May of next year.

The progressive wage policy is a new policy for the labor market that aims to raise workers’ pay in a planned way. It will go along with the policy for the minimum wage.

It includes a wage system that aims to raise low wages by giving workers better skills and making them more productive. Employers will have to slowly raise their workers’ wages based on their skills and years of experience.

Some employers may be losing money when they adopt the Progressive Wage Model. However, there are several ways this model can help their companies:

1. Increase Productivity

Prime Minister Datuk Seri Anwar Ibrahim said the Progressive Wage Model is a wage structure to uplift workers’ low wages by upgrading skills and improving productivity.

Harvard Business Review notes that pay increases make the company more productive for two main reasons. First, giving wages above the market rate can be a good way to get people to work harder. In other words, if a person doesn’t work hard, they have more to lose because it’s harder to find a job that pays the same. This makes them more likely to work well and stay at their jobs. These pay hikes are also called “efficiency wages.

2.Profit Increase

As workers get better at their jobs, get more experience, and learn new skills, they move up a wage scale and become available for higher pay. The Progressive Wage Model is a fair method that gives workers and employers a fair share of the market.

Productivity growth means that output and income are going up, which will make up for the rise in labor costs. So, both employees and companies are doing well.

At the same time, if workers are more productive, companies will make more money. Also, Progressive Wage Model can be made to fit the needs of a particular business or industry by considering its unique qualities and needs. This flexibility makes it possible to make tailored changes to wages based on the skills needed by different industries. This makes sure that wage structures are reflected more accurately.

In Malaysia, Progressive Wage Model should focus on low-wage workers, especially those with semi-skilled or low-skilled jobs. Singapore has used Progressive Wage Model to stop workers’ wages from staying the same.

The model was made by groups with employers, unions, and government representatives.

Progressive Wage Model has raised wages at a steady and effective rate that hasn’t hurt low-wage workers’ jobs.

It can show a clear path to a better job, higher pay, better training, and higher standards and productivity.

At the same time, if workers are more productive, companies will make more money.

3. Government Cash Incentive

Employers who raise their employees’ salaries under the progressive wage policy will receive cash incentives from the government, Economy Minister Rafizi Ramli announced yesterday.

The incentive is encouraging employers, especially small and medium enterprises (SMEs), to participate in the policy.

Employers will get a cash reward  after they show proof that they have met the policy’s requirements.

The incentives will go to whoever applies and meets the standards. Those who can’t because the government’s measures for that year have already been met will have to wait until the next year.

4. Combats Inflation

Deputy Prime Minister Datuk Seri Zahid Hamidi mentioned that the Progressive Wage Policy can help balance rising wages and living costs for citizens in the city and rural areas. By weighing income and expenses indirectly, it can handle rising inflation

There is still little or no proof that worker’s pay causes high inflation. The rising of wages doesn’t cause prices to go up.

During times of high inflation in the past, economists worried about a wage-price spiral. This is the idea that when workers want higher wages to deal with inflation, employers pass these higher wages on to consumers through higher prices. This makes workers want even higher wages, which creates a vicious cycle.

Wage increase actually helps combat inflation! Current price and salary growth by industry shows no correlation between price inflation and wage growth.

ALSO READ: Malaysia fines 400 companies in 2023 for labor offenses


Anisa is a writer who focuses on career and lifestyle topics in an effort to motivate both job searchers and employers towards greater fulfillment in their professional lives.

Reach me at anisa@jobstore.com.

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