Most industries not ready for minimum wage hike

More efforts should be directed towards controlling the rising cost of products and services


MOST industries in the country are not ready to increase the minimum wage as they are still reeling from the economic shock brought by Covid-19.

Malaysian Employers Federation president Datuk Dr Syed Hussain Syed Husman told The Malaysian Reserve (TMR) that more efforts should be directed towards controlling the rising cost of products and services.

“We must remember that most Malaysian businesses are micro, small and medium enterprises (MSME), 95% are in this group. So, when we talk about wages and cost, we must think of them.

“The big corporation can afford to offer any salary they want. MSMEs are suffering and with a small increase in their cost they will suffer and close down,” he said.

“Many employers continue to face severe challenges to remain sustainable. The grim economic scenario does not allow any space for an increase in existing minimum wages. It is important that decision-makers keep this in mind before implementing and cost increase policies,” he added.

Earlier this week, Supermax Corp Bhd rolled out a new and comprehensive Foreign Worker Management Policy and enhanced its existing Human Resources Policies to immediately strengthen human resource and migrant workers policies and practices.

Along with the implementation of these new policies, Supermax proactively raised its minimum wage to RM1,400 across all categories. The current minimum wage set under the Malaysian Employment Regulations is RM1,200.

Syed Hussain opined that individual companies that are financially sound are free to decide and implement increases in starting pay as long as it is better than the minimum wage.

“Higher starting pays by a particular employer as implemented by Supermax is an isolated matter and is not likely to have a negative impact on the rate of inflation compared to a situation where there is a review of the minimum wages rates at the national level.”

Syed Hussain proposes the establishment of a National Cost Monitoring Council to study increases in prices of all goods and services.

He stressed that it is not the question of minimum wages but on managing costs. With inflation and higher cost, he said that any amount of wages will not improve the livelihood.

“Most important is to ensure that the cost structure is addressed. In Malaysia, the cost only goes one way up. It never comes down,” he said.

Malaysian University of Science and Technology’s Institute of Postgraduate Studies dean Dr Geoffrey Williams said the changes at Supermax and elsewhere are a start but he noted that this is in response to pressure from international regulation on local firms’ treatment towards foreign workers.

“The increase in salaries to RM1,400 is still insufficient. According to Bank Negara Malaysia, the living wage for single people is around RM2,700. With RM1,400, workers can barely afford basic necessities such as food, shelter or proper clothing and of course almost nothing to save afterwards.

“Also, these poverty wages are underpinning high profits so workers are not getting a fair deal while owners and shareholders make huge returns. The wages do not reflect the productivity or value-added of the workers and so they are exploitative in economic terms,” he told TMR.

He stressed that wages in the rubber glove industry are not going to affect inflation because they are concerned with a single company and sector.

“Overall wages are falling, not rising in Malaysia. The Department of Statistics Malaysia reported average wages fell by 9% and median wages fell by 15.6% in 2020, for example. Unemployment, underemployment and shorter hours are also a factor in keeping wages too low.

“The issue of higher minimum wages is more an issue of economic efficiency and social equity. Workers should be paid the value of their productivity but the ineffective labour market allows employers to exploit workers and keep wages below the efficient wage level,” he added.

Meanwhile, Centre for Market Education CEO Dr Carmelo Ferlito thinks it is a good move since it is a company decision and not a government imposition which means that the firm believes they can bear the additional costs and they believe this move can be beneficial for them.

“It is good because it does not look only at wages, but it is more comprehensive. It can be an example for others, in particular, big corporations that more easily can afford such a holistic approach.”

He does not see a rise in minimum pay as a threat to inflation.

“In fact, the dangerous part of the inflation we are experiencing now is coming from money supply that expanded faster than economic growth (expansive fiscal and monetary policies). The way to contain inflation is now implementing a sound and gradual plan of government spending cuts,” he told TMR.