Johari: Gradual wage increase to prevent shocks to the economy


THE government will implement mechanisms that are designed to increase the median income of Malaysians gradually, allowing Malaysians to reach an acceptable standard of living.

Second Finance Minister Datuk Seri Johari Abdul Ghani said the government is on the same page with Bank Negara Malaysia’s (BNM) recent view that Malaysians should be earning more in tandem with the rising cost of living and the expansion of the domestic economy.

He told The Malaysian Reserve that the mechanisms to raise wages will be undertaken gradually, to “prevent shocks to the economy”.

“We must understand that 97% of our businesses are small and medium enterprises (SMEs). If we force them to raise salaries for locals, these companies will suffer,” he added.

BNM, in consideration of the low-wage conundrum, has recently recommended that employers use a “living wage” as a guideline to compensate their employees for their labour.

Essentially, the living wage refers to the income level needed to achieve a minimum, acceptable standard of living, depending on the geographical location.

Citing Kuala Lumpur as an example, the central bank suggested that a living wage in the city two years ago was about RM2,700 for a single adult. The living wage estimate for a couple without a child was RM4,500, while for a couple with two children, it was RM6,500.

Johari said the government agrees with the average scale suggested by the central bank, and will work towards improving the minimum wage of Malaysians.

“The raise in wages can only be implemented in tandem with the reduction of foreign labour dependency by industries,” he said.

Johari said the current minimum wage for the government sector is RM1,200 and private sector RM1,000.

“From there, we shall gradually move towards RM1,500 and above as the economy grows,” he said.

He added that the government is currently embarking on greater campaigns to promote automation among heavy labour-intensive industries.

“That is why we are providing incentives, especially for SMEs, so they can embrace technologies and artificial intelligence (AI), and relying less on foreign workers.

“Even in a situation that foreign labours have to be employed, we have to ensure that a proper levy be imposed to equal the cost of hiring a foreign worker and a local,” he explained.

BNM governor Tan Sri Muhammad Ibrahim recently said the main underlying cause of Malaysia’s low-wage environment is the high number of cheap foreign workers.