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Minimum Wage and Employment of Malaysian Low-skilled Workers

Author

Listed:
  • Kek Jing Wen

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

  • Lai Wei Sieng

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia)

Abstract

The current study is inspired by inconclusive empirical findings on the impacts of minimum wage on employment. The majority of past studies have concluded that an increase in the minimum wage negatively impacts employment, despite certain scholars discovering either an insignificant or a positive impact. Hence, this study aims to investigate the impact of the Malaysian minimum wage on the employment opportunities of low-skilled workers. The data are collected annually from 1995 to 2020. An autoregressive distributed lag (ARDL) model is employed to examine the impact of the Malaysian minimum wage on the employment of low-skilled workers. The bounds test method and error correction model (ECM) are subsequently utilised to determine both short- and long-term effects. As a result, the employment of low-skilled labour is found to be positively impacted by the minimum wage, with this impact being statistically significant in both the short and long terms. However, when the interaction variables are included, the effect on the employment of low-skilled workers is negative and insignificant. Furthermore, neither increasing labour productivity nor technological advancement significantly altered the impact of the minimum wage on employment.

Suggested Citation

  • Kek Jing Wen & Lai Wei Sieng, 2023. "Minimum Wage and Employment of Malaysian Low-skilled Workers," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(2), pages 255-273, December.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:2:p:255-273
    DOI: 10.22452/MJES.vol60no2.6
    as

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    More about this item

    Keywords

    Minimum wage; low-skilled workers; employment; ARDL; Malaysia;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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