NOT every company or business sector will be required to increase wages if the government revises the minimum wage policy, according to economists. They highlighted that small and medium-sized enterprises (SMEs), particularly micro businesses, may not be financially capable of implementing such changes.
At present, the minimum wage in Malaysia remains at RM1,500 per month. The national poverty line income was recently revised from RM980 to RM2,208, meaning that over 400,000 households earning below this threshold were classified as poor in 2019, according to the Department of Statistics Malaysia.
Dr Ahmed Razman Abdul Latiff of Putra Business School said that while raising wages is a commendable initiative, it should not be mandatory for all businesses. He argued that only financially robust companies should adjust their pay structures.
“Not every company, and not all at once. SMEs and micro businesses, whether in urban or rural areas, may struggle to meet the demands of a new minimum wage policy for obvious reasons,” Razman explained.
He also suggested that any new wage policy should account for regional differences. “For example, RM1,800 might suffice in Sabah or Sarawak, whereas in Kuala Lumpur, Penang, or Johor, the rate should exceed RM2,000. The size of the company is also important. Foreign companies, for instance, should be able to comply more easily,” he added.
Razman emphasised the importance of conducting a comprehensive study before the new minimum wage is announced. “A simulation is needed. The government should gather data from sources like the Employees' Provident Fund and the Companies Commission of Malaysia,” he said.
Human Resource Minister Steven Sim recently mentioned that a new minimum wage proposal is expected to be presented to the Cabinet next month. The ministry has received a report and recommendations from the National Wages Consultative Council, chaired by Tan Sri Zainal Rahim Seman. Sim also noted that the minimum wage, last raised in May 2022 from RM1,200 to RM1,500, is under review.
Prime Minister Datuk Seri Anwar Ibrahim has expressed hope that private companies, particularly those making substantial profits, will revise their salary schemes to provide fairer compensation to their workers. He added that public service wage reforms should signal to private companies to increase wages to alleviate financial pressures on employees.
Consider the consequences first
Barjoyai Bardai of Universiti Tun Abdul Razak noted that the minimum wage should ideally be above the poverty line of RM2,208. However, he warned that this could negatively impact small and medium business owners, urging the government to devise a proper mechanism before implementing any changes.
“If we look globally, developed countries often do not have minimum wage policies. If we introduce this policy, it must be set above the poverty line. For instance, if we agree on RM2,300, many small businesses might close down as they won’t be able to sustain such wage increases,” Barjoyai explained.
He pointed out that some sectors are still underpaying their workers. “There are still preschool teachers earning only RM700 a month, which is well below the current minimum wage of RM1,500. This is exploitation. However, it’s foreign workers in large companies who are benefiting from the minimum wage, as these firms can afford to pay,” he said.
Barjoyai also cautioned that altering the minimum wage policy might affect Malaysia’s competitiveness. “Foreign companies could move operations to countries like Myanmar, where they only need to pay workers RM1,000 a month. Changing our policy might cause us to lose our competitive edge,” he warned.
Echoing Razman’s views, Barjoyai stressed that a thorough study and a well-thought-out mechanism are essential to ensure the policy change does not backfire. – September 8, 2024.
