Firms’ Salary Adjustment in Response to Crises

Abstract

This study aims to investigate firms’ behavior on salary adjustment in response to the Covid-19 crisis and presents findings on median basic salary change in the Malaysian labor market by occupational groups during quarters 3 and 4, 2020. The result finds a lower prevailing salary offer for the newly employed. For high-skilled occupations, employees above the age of 40 have seen the median salary class dropping one class below, while the young cohort below age 40 climbs up one salary class. The study has employed different machine learning techniques to build classification models for the prediction of the binary outcomes, namely “salary freeze or cut”, or “salary increase”. The findings discovered that the important factors that increase the likelihood of a “salary freeze or cut” for the newly employed had been consistently attributed to the occupational group by MASCO and the number of available job vacancies. Besides that, the job opportunity and salary potential for mid-skilled jobs are found to be shrinking despite the younger age cohort of workers receiving a higher median salary in Q4 as compared to Q3; this, however, comes with a reduction in job vacancies.