Policy brief - Malaysia’s Progressive Wage Policy - A guide to policy design considerations

This, alongside reported limitations16 in the quality of specialised training providers, contributes to huge differences17 in the percentage of employees who receive training by sub-sector (Figure 2) and consequently the utilisation of the HRDF levy across industries.18 On the demand side, other barriers include a low levy balance for many MSMEs (a weakness of the current levy system) and informat. [...] Like the Singapore model, Malaysia’s PWP offers firms incentives for each eligible employee who is the recipient of a wage increase in line with the PWP salary guidelines, subject to the completion of required skills training. [...] For the first wage tier (up to S$2,500 monthly income), the government co-funds 75% of the monthly wage increase under the PWM for the first two years, with the proportion falling in the subsequent years (Table 2). [...] The pilot phase is a critical opportunity to test, learn and adapt PWP to ensure its effectiveness and sustainability when rolled out on a larger scale – and as such it needs to provide valid information about the impacts, benefits and weaknesses of the proposed PWP. [...] The current strategy of choosing 1,000 firms voluntarily will create challenges in ensuring that the results of the pilot are generalisable to the broader economy and limit the ability of policymakers to draw actionable insights into PWP’s impact.