Minimum wage to go up

This article first appeared in The Edge Financial Daily, on October 13, 2017.
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KUALA LUMPUR: The human resources ministry is raising minimum wage levels next year, according to minister Datuk Seri Dr Richard Riot Jaem.

Bernama reported yesterday the National Wages Consultative Council had started making plans to review the Minimum Wages Order 2016 to determine new rates for Peninsular Malaysia, Sabah, Sarawak and Labuan, before tabling it to the Cabinet.

This would be the second time in three years that minimum wage levels in the country have been revised. In July 2016, The minimum salary was raised to RM1,000 from RM900 in Peninsular Malaysia, and to RM920 from RM800 in Sabah, Sarawak and Labuan.

“We know that the minimum wages order must be reviewed at least once in two years. The review will look at the ability of the employer to pay the minimum wage which is a responsibility that is very challenging to ensure that the minimum wage policy meets all objectives”, Riot was quoted by Bernama as saying.

The review is said to be a gradual effort towards closing the minimum wage gap between employees in Peninsular Malaysia and in Sabah, Sarawak, and Labuan.

Alan Tan, the chief economist of Affin Hwang Investment Bank, commended the latest move since higher wages would in turn help to boost consumer spending — a key growth driver of the domestic economy.

“Some parties may argue that it will affect businesses as labour costs would increase, but we think this will be offset by higher productivity”, Tan told The Edge Financial Daily.

He reckons that Malaysia’s minimum wage is still lower than some of the countries in the region. 

“Yes, ours maybe higher than that of Thailand, the Philippines and Indonesia. But Malaysia’s business infrastructure is better than these countries, [and so] any increase in minimum wages should not hurt Malaysia’s competitiveness,” he said, adding that wage levels are not the only consideration for foreign businesses investing in Malaysia.

Tan said higher minimum wages might also entice more local citizens to work in sectors that are currently being dominated by foreign labour, thus reducing our reliance on the latter.

Similarly, president of Malaysian Rubber Glove Manufacturers Association (Margma), Denis Low, believes that there should be a standardised minimum wage across the country.

Low noted the impact from the increase in minimum wages on the glove makers should be minimal, as Margma’s members have been paying salaries higher than the minimum wage levels.

“However, we hope the government would be cautious in increasing minimum wage moving forward. It should not be increased too much because there is competition in the industry, and glove makers should stay competitive”, he added.

Meanwhile, president of Federation of Malaysian Manufacturers Jacob Lee said any upward revision of minimum wages would no doubt add to the burden of the manufacturers.

“At the moment, we believe that the minimum wage level should stay put. We have just revised it last year, and the economic conditions have not been too ideal for businesses this year”, he said.

He explained that businesses are already feeling the pinch after the revision of levy on foreign workers and the Employment Insurance Scheme, in addition to the challenging operating environment.

Lee views that another hike in wage levels next year would be too soon and frequent.

“It will be a burden not just for manufacturers, but to businesses across all industries since the higher operating costs have always been a concern.”