Refusal to raise minimum wage is illogical, says analyst


NOT raising the minimum wage to RM1,500 is irresponsible, illogical and primitive, said DM-Analytics Sdn Bhd senior researcher Zouhair Mohd Rosli (picture).

He said this in response to the Malaysian Employers Federation (MEF) who recently said an RM1,500 minimum wage will kill many businesses and derail economic recovery.

Citing the International Labour Organisation (ILO), Zouhair said the benchmark for minimum wage is 60% of the median wage.

“In 2019, our median monthly wage stood at about RM2,500, of which 60% is already RM1,500. Therefore, the minimum wage should be at least RM1,500,” he told The Malaysian Reserve yesterday.

Moreover, he said businesses that cannot afford to pay workers a higher minimum wage should work for themselves instead of employing workers.

He also opposed MEF’s concern that micro, small and medium enterprises will suffer from the small increase as about 98.9% businesses belonged to this group.

“Bear in mind, micro-businesses usually do not have employees. They work by themselves and are categorised as ‘own account workers’ or self-employed,” he said.

Hence, he opined that increasing the minimum wage to RM1,500 per month before yearend is unlikely to impact micro-businesses.

Meanwhile, he viewed that some companies are not paying their workers fairly where the bulk of the company’s profits went to owners or employers.

“This is even worse among large companies, where for every RM100, workers get only RM20 and the balance goes to the employers as profits,” he noted.

Zouhair also disagreed with MEF’s statement that increasing the minimum wage will increase unemployment because the recent global evidence suggests otherwise.

Meanwhile, the Centre for Market Education (CME) said a simple increase in minimum wages is not the proper answer to the problem as the purchasing power of workers is under threat.

CME said policymakers should at least identify who is in the minimum wages group and why their income is so low.

“In all likelihood, many of them are low-skilled and immigrant workers that cannot command a higher salary because of their skills and productivity.

“Policymaking should deal not only with good intentions but also, and above all, with unintended consequences — too high wages could expel unskilled workers from the labour market rather than bettering their conditions,” CME said in a statement yesterday.

It added that the best way to preserve both profitability or survival of enterprises and jobs is to let market forces determine the salaries.

“A better way to improve the labour conditions of unskilled workers is to increase the degree of freedom of movement between different employers.

“This would create competitions among employers to get the best workers, resulting in wages increase, rather than by law,” it said.

CME also opined that the government should be concerned with other and more general problems affecting the labour market such as the fresh graduate situation, rising underemployment and inflation.

“The low wages for fresh graduates and the phenomenon of rising underemployment are strictly interrelated and due, at least partially, to mass tertiary education,” it noted, adding that education reform is needed, aiming at lowering the number of tertiary education graduates.

Similarly, the Federation of Malaysian Manufacturers (FMM) was concerned over the proposal to increase the minimum wages to RM1,500.

President Tan Sri Soh Thian Lai said businesses are still fragile from the impacts of the pandemic and that any increase in business cost would derail a business and economic recovery.

“Adjustments to wages must be done progressively and considering the multi-stakeholder impact.

“Industries continue to face risks posed by the pandemic and the current Omicron variant, that continues to impact global supply chains and logistic connectivity as well as other cost pressures due to rising commodity prices, energy prices and labour supply shortages that could gravely derail business recovery efforts,” he said in a statement yesterday.

He added that it is critical for a tripartite discussion to be convened to consider the announcement.

He noted that neighbouring countries like Indonesia, Cambodia and Thailand are also planning minimum wage adjustments in 2022 given that price inflation is a global phenomenon.

However, he said, the adjustments by these countries are very gradual taking into consideration the effects of the pandemic on business sustainability as well.

“It should also be noted that these countries do not have a uniform minimum wage rate, instead the rates are based on provincial locations or only imposed on certain sectors unlike Malaysia,” Soh said.

He added that with the necessary controls on cost increases as well as concerted efforts by the industry to defray cost increases internally, employers can ensure that employees will not be affected including being able to provide the yearly and/or contractual adjustments to wages.