BLOG: The Impact of Minimum Wage Implementation on Women’s Earnings: Evidence from Malaysia

By May Lyn Cheah, University of California, Berkeley

This paper investigates the effect of the introduction of minimum wage legislation in Malaysia, which became effective from January 1, 2013 for employers with six employees or more, and was fully enforced by January 1, 2014 for all employers. The minimum wage ruling prescribed a rate of RM900 (ŨSD 230) per month for Peninsula Malaysia and RM800 (ŨSD 204) for Sabah, Sarawak and Wilayah Persekutuan Labuan.

Female labor force participation in Malaysia is the third lowest in ASEAN, at 51%. Prior to 2014, female labor participation rate in Malaysia was 46.6%, and it has since increased to 50.6% in 2016. Male labor participation rate remains relatively unchanged at approximately 77% in 2016. Data from Labour Force Survey conducted by Department of Statistics Malaysia (DOSM) indicates that the female participation rate increases the most for females without formal education and for those with just primary education, i.e. females who mostly work in low wage occupations. The increase in female labor participation rate which coincided with the implementation of minimum wage policy prompted me to investigate the changes in level of wages for females in low wage occupation and decrease in gender wage gap which might have driven them to join the workforce. Using high quality individual level microdata from DOSM’s Salaries and Wages Survey conducted yearly since 2010, I attempted to capture the relationship of minimum wage legislation on wages of females working in low wage occupations in Malaysia using panel data OLS regression analysis with year and state fixed effects. My research finds that female workers working in low paying occupations experience approximately 30% higher monthly wages. The gender wage gap decreased the most for employees with just primary school and junior middle school qualifications.

Read the full paper here.

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