Wage Differentials between Foreign Multinationals and Local Plants and Worker Quality in Malaysian Manufacturing

Abstract

Using industrial census data for 2000, and smaller sets of survey data for 2001–2004, this paper examines the extent of wage differentials between medium-large (20 or more workers) foreign multinational enterprises (MNEs) and local plants in Malaysia's manufacturing industries. On average, wages in sample MNEs were higher than in local plants by two-fifths or more. In addition to being more capital-intensive and relatively large, MNEs also hired higher shares of workers in highly paid occupations and with moderate or high education. Results from large samples of 17 manufacturing industries combined suggest that statistically significant MNE–local differentials of 5%–9% persisted even after accounting for differences in worker occupation, education, and sex, plant capital intensity and size, as well as the influences of yearly fluctuations, industry affiliation, and plant location on the constants estimated. When MNE–local differentials and all slopes are allowed to vary among the 17 industries, positive and significant differentials were observed in all estimates for six industries: food and beverages, chemicals, rubber, general machinery, electrical machinery, and furniture. Positive and significant differentials were also observed in most estimates for another five industries. However, the size and significance of these differentials often varied depending on the industry and sample examined, as well as the estimation technique used.

7 Exporting, education, and wage differentials between foreign multinationals and local plants in Indonesian and Malaysian manufacturing

“…In addition, similar evidence for Malaysian plants in [2000][2001][2002][2003][2004] (Ramstetter 2013) also suggests the existence of positive, MNE-local wage differentials after accounting for both worker education and occupation, in addition to other plant characteristics, both when all industries are combined and at the industry level. However, none of these studies account for the potentially important effect of a plant's export status on MNE-local wage differentials.…”

“…As described in the introduction, when large samples of all manufacturing plants are used, previous studies have found that MNEs paid significantly higher wages than local, private plants in Indonesia in 1996(Lipsey and Sjöholm 2004aRamstetter and Narjoko 2013) and local (private and state-owned) plants in Malaysia in [2000][2001][2002][2003][2004] (Ramstetter 2012a(Ramstetter , 2013. These studies are distinguished from other studies of MNE-wage differentials by the important fact that they account for the educational background and sex of a plant's workers, in addition to plant size, and a plant's capital intensity or a proxy.…”

“…1 They found that MNEs paid significantly higher wages than local, private plants even after accounting for the educational background of the plant's work force and other plant-level characteristics, and that these conditional wage differentials were larger for white-collar workers than for blue-collar workers. Recently, Ramstetter and Narjoko (2013) reexamined the 1996 evidence and added evidence for 2006, obtaining qualitatively similar results for both years when all manufacturing plants are combined in one sample, though industry-level evidence was weaker.…”

“…However, it is also potentially interesting to examine differences between importers and non-importers, or between plants with varying degrees of export or import dependence. Similarly, it may be interesting to distinguish among MNEs with differing degrees of foreign ownership, though this is not possible for Malaysia and previous evidence suggests this distinction is not very important to wage determination in Indonesia (Ramstetter and Narjoko 2013). It would also be interesting to examine other host economies, though lack of data on worker education is a key constraint.…”

Research on the Core Technology and the Development Tendency of Modern Precision Machinery Manufacturing

“…(3) Precision machining is an important part of the foundation of modern high-tech technology. With the rapid development of science and technology, precision processing technology as the basis of high-tech development also has a growing, processing precision, processing efficiency in soon, in the future, precision machining technology is to a higher precision, higher efficiency, largescale and miniaturization direction (Obashi et al, 2016) (Ramstetter et al, 2014) (Ando et al, 2014).…”