PETALING JAYA: Bank Negara is recommending that employers provide a living wage that better reflects the cost of living.

The central bank had commissioned a report based on a survey of the cost of living in Kuala Lumpur.

The survey showed that in Kuala Lumpur, the provisional estimates of a living wage ranged between RM2,700 and RM6,500 per month. It said the living wage for a single adult was RM2,700 per month, RM4,500 per month for a couple without children and RM6,500 per month for a couple with two children. Taking these statistics into consideration, the central bank said a living wage could only be effective if set at a realistic and sustainable level.

“It is imperative to carefully derive living wage estimates that balance between ensuring employees can afford a minimum living standard, and the capability of employers to pay wages that commensurate with employees’ productivity.
“Setting a living wage rate that is too high could lead to the risk of employers passing on the additional wage cost to consumers through higher prices of goods and services.”

The central bank also said the living wage estimates in Kuala Lumpur were below the median income (in Kuala Lumpur) of RM9,073, emphasising that up to 27% of households were earning below the living wage.

“In terms of household type, a larger share of single-adult households and couples with two children were earning below the estimated living wage in 2016, compared to couples without children.
“The finding for single-adult households is consistent with the fact that graduates with a first degree or diploma earn on average, starting salaries of RM2,207 and RM1,346 per month, respectively.”

It pointed out that wage pressure on employers could also intensify if high-wage workers insist on maintaining the same wage differential with low-wage workers as before.

“The benefits of the living wage may be offset if the wage pressure eventually translates to an even faster increase in inflation and cost of living.”
It also said the estimates of a living wage in Kuala Lumpur would likely evolve over time due to inflation and lifestyle changes.