New minimum wage to benefit foreign workers more

Most of the money earned would be transferred to the foreign workers’ countries of origin, says MEF


The proposed increase in minimum wage is expected to bene t foreign workers more, as they make up 70% of the group of people that are underpaid in the country.

Malaysian Employers Federation (MEF) ED Datuk Shamsuddin Bardan told The Malaysian Reserve (TMR) that the move would also create certain repercussions, as most of the money earned would be transferred to the foreign workers’ countries of origin, instead of being retained to benefit Malaysia’s economy.

“The total remittance volume sent home by foreign workers from Malaysia was RM28.21 billion in 2014 and it increased to RM34.75 billion in 2015.

“We should change this to hiring our skilled graduates from the Malaysian Skills Certification System (MSCS), which will benefit our own people, increase productivity and with better cost management of doing business,” Shamsuddin said.

He said if the scheme is implemented, more Malaysians would be encouraged to enroll in such programmes.

Instead of increasing the minimum wage, Shamsuddin said the government should consider standardising the salary for MSCS graduates.

For instance, the government could give a minimum salary of RM1,300 for the Malaysian Skills Certificate Level 1 (SKM 1) graduates, RM1,500 for SKM 2 and RM1,800 for SKM 3.

Shamsuddin said companies can also reduce their dependency on foreign workers if the scheme is implemented.

TMR recently reported Human Resources Minister Datuk Seri Dr Richard Riot Jaem as announcing that a new minimum wage for Peninsular Malaysia, Sabah, Sarawak and Labuan will be introduced next year.

The move will close the minimum wage gap for the private sector — where it is RM1,000 in Peninsular Malaysia, and RM920 for Sabah, Sarawak and Labuan.

He said the National Wages Consultative Council had started making plans to review the Minimum Wages Order 2016 to allow the government to determine the new minimum wage rates in line with the country’s current socio- economic development.

Shamsuddin said policy-makers should be cautious in their planning — as it has been proven many times before that increasing the minimum wage will also raise inflation rate.

The increase in wages would also affect companies’ cost of doing businesses as it would also result in the hike of goods and services prices.

In turn, Shamsuddin said companies have no choice but to pass the additional cost to the consumers.

“It’s not easy to increase the price for the products in the international market as those consumers are sensitive to change. If you do it, they will just look for other products with cheaper prices,” he added.

Meanwhile, Socio-Economic Research Centre Sdn Bhd ED Lee Heng Guie conceded that increasing the minimum wage ceiling would cause inflation. However, this is something that could not be controlled.

“If you look at the previous higher minimum wage adjustments, the past effects on inflation are manageable,” Lee told TMR.

He added that while foreign workers will benefit more, locals could still enjoy higher salaries.

“Although they will be sending their salaries back home, the increase in minimum wage will also grow their tendencies to spend here, perhaps for their basic needs,” Lee added.


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