SALT is to food what productivity is to the health of an economy. Calculated as output per labour hour, productivity influences wages and determines the competitiveness of a nation.
Competitiveness then contributes to economic growth and prosperity. This is why productivity has always been high on the government agenda.
Post-pandemic, productivity growth has been on an uptick, averaging 3.6 per cent. Wages, too, have been trending upwards at double that rate. Sadly, wages at lower levels of employment are hardly enough to meet the escalating cost of living.
One way to raise productivity, wages and competitiveness is through labour-market reform.
Through a system of progressive wages that is aligned with productivity improvement, the government aims to ensure that wages afford a reasonable standard of living, especially for those at the lower rungs of society.
Employers will be encouraged, with limited government subsidies, to pay a median wage of RM2,700 to those who are scraping by.
As employees upskill and reskill through an extensive network of over 2,400 technical and vocational education and training institutions, or TVET, and employers introduce automation, productivity growth should be able to underwrite this benchmark wage.
Evidence suggests that local wages are depressed on account of foreign labour. Locals shun low-paying jobs, pushing employers to hire foreigners.
To break this vicious cycle, the government has imposed strict quotas on hiring foreign labour and restricting them to priority sectors. Eventually, the current foreign to local labour ratio of 7:1 will be reversed to 80 per cent employment of locals in the manufacturing sector.
More can be done to ensure higher wages. First, as better skills affords better pay, the industry should take the lead in TVET instead of playing second fiddle to the government.
In Australia, rather than wait for the government to come around, the industry takes it upon itself to upgrade the skills of workers. Additionally, universities run vocational programmes alongside their traditional ones.
If the industry is to take the lead in TVET programmes for its employees, the government should recognise these programmes after due diligence. That will also allow for greater workforce mobility, reduce mismatches and, consequently, promote productivity growth.
Second, employees should take responsibility for upgrading their skills for better wages and mobility. If opportunities are not available within their workplaces, they should be given chances to do so at other institutions. The government could offer vouchers for skills training at an institution of their choice.
Third, attract and retain talent to stem the brain drain. The Mid-term Review of the 12th Malaysia Plan considers this issue as unfinished business. This problem plagues even rich countries. For example, about a 10th of highly educated Italians have gone abroad in search of a better life.
Local salaries cannot match those prevailing overseas. However, better and cheaper opportunities for education locally, and better working conditions and prospects subsequently might make life abroad less enticing.
As part of talent management, the government and industry should ensure a future-ready workforce that is comfortable with artificial-intelligence technologies.
That way talent will not only be relevant but also more productive.
The labour market must cater for the younger generation. This generation eschews desk jobs. They prefer job flexibility to maintain their work-life balance. Absent these, they would job-hop to find a position that suits their predilections.
To retain talent, the industry must respond suitably. In return, employers must be empowered by legislation to easily dismiss unproductive workers with appropriate compensation. Such legislation will reduce the risk of hiring.
Labour reform is important. It raises productivity, wages and competitiveness, thereby becoming a magnet to high-quality investments that Malaysia requires.
The writer is a former public servant
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times