Making the case for a minimum standard of living

BANK Negara Malaysia (BNM) believes that it is timely to aspire for all citizens to attain at least a minimum acceptable standard of living, under the living wage concept, as Malaysia moves closer to becoming a high-income nation.
Estimating the living wage includes taking into account variations in prices and living standards across location and household composition; deriving a representative basket of goods and services that reflect a minimum acceptable living standard, estimating the cost of the representative basket of goods and services and periodically updating the living wage estimates.
This standard approach is expected to work to ensure all segments of society reap the benefits and not be dislocated in the process of achieving a high-income nation status.
Using the living wage as a benchmark to assess the adequacy of current wages and social assistance, international experiences suggest that it has potential to inform, challenge and enhance policies towards the goal of achieving minimum acceptable living standard.
As such a significant amount of consideration is needed in calculating a representative living wage level.
Apart from allowing employees to afford a minimum acceptable standard of living, the living wage may also yield positive spillovers to the broader economy. These include reductions in employee turnover rates and improvements in employees’ morale and productivity.
The possibility of adverse outcomes from the implementation of the living wage underscores the importance of a corresponding increase in productivity and movement towards a high-skilled workforce.
The living wage can bring benefits to both employees and employers, with limited negative consequences on the economy, should it be representative and reasonable enough to guide employers towards paying fair wages to employees.