Pay Determinants in the Malaysian Economy: Evidence from Employee, Employer, and Employer-Employee Perspectives
The objective of the thesis is to investigate Malaysia’s pay determinants from three different perspectives, namely: employees’ perspective, employers’ perspective, and both employees-employers’ perspectives. As a matter of fact, previous studies have not been able to document the potential impact of employers and firms on pay determinants within the Malaysian economy, owing to a lack of appropriate data. Therefore, with the availability of new datasets – worker-level dataset (WLD) and firm-level dataset (FLD) obtained from the Second Malaysian Productivity Investment Climate Survey (PICS-2), we have developed a matched-worker-firm dataset (MWFD), so that by employing such dataset it will add a new dimension to pay analysis in Malaysia as well as allowing for a comprehensive understanding and clearer picture of Malaysia’s pay system. From the employees’ prospective, the findings of this thesis indicate that a worker with a higher education level, skills and training generally gets a higher pay compared to those without. In addition, a worker who undergoes training from his/her current employer gets a higher pay compared to those who had training from a previous employer or only off-the-job training. At the same time, workers with complex computer skills, as well as those who are in professional employment and management, also receive a considerably higher pay. From the employers’ prospective, however, the findings indicate that firm size, human capital stock in the firm, worker performance, capital stock, and firm performance are important factors that affect the Malaysian average monthly pay. Besides, the elasticity of pay with respect to employer size is two percent, and this figure supports the notion that the Malaysian labour market can be characterised as imperfect competition. From both employers-employees’ prospective, it is obvious that both observable worker characteristics and unobserved firm-effects are key elements of pay determinants. Nevertheless, firm effects seem to explain the variability in pay determinants more than observable worker characteristics. In addition, the relationship between pay component and firm performance exhibits a positive tendency. This implies that workers get a higher pay either because of worker characteristics or that firm-effects are being employed in firms that are more productive and profitability.
Pay determinants, Malaysian Economy, Employer-Employee Perspectives, Matched data
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