Implementing RM1,500 minimum wage by year end will derail economic recovery and kill many businesses, says MEF

Implementing RM1,500 minimum wage by year end will derail economic recovery and kill many businesses, says MEF
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KUALA LUMPUR (Feb 6): Increasing the minimum wage to RM1,500 per month before the year end will kill businesses that are still reeling from the economic shock of the Covid-19 pandemic and the devastating effects of the recent major floods, according to the Malaysian Employers Federation.

Rather than raising the minimum wage, which the majority of Malaysian businesses are not in a position to implement now, more efforts should be directed towards business recovery of the private sector and controlling the rising cost of products and services, the MEF said.

“We must remember that most Malaysian businesses are micro, small and medium enterprises (MSMEs), 98.9% are in this group. So, when we talk about wages and cost, we must think of their survival and sustainability. MSMEs are suffering and even [with] a small increase in their cost, they will suffer and close down, what more an increase of RM300/400 per month on top of existing national minimum wages.

“The fact remains that currently, 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 any increase in national minimum wages," said MEF president Datuk Dr Syed Hussain Syed Husman.

He also expects the move to result in higher unemployment and business debts, as companies would be unable to service their loans.

"MSMEs will really suffer. Some are saying it is better for them to move their operations to other ASEAN countries where the overall cost of doing business is much cheaper," he added.

The MEF's statement came a day after Human Resources Minister Datuk Seri Saravanan Murugan said a new minimum wage of “around RM1,500 a month” is expected to be implemented before the end of this year. He said the new rate had yet to be finalised, as the ministry was awaiting Cabinet approval. In February 2020, Malaysia’s minimum wage was raised to the current RM1,200 per month from RM1,100 per month previously.

Syed Hussain said a further increase in the minimum wage will largely benefit foreign labour more, as locals are already paid wages higher than RM1,500. 

This also means an employee whose current wages are well above the minimum wage could see no salary adjustments and be demotivated, he said.

Meanwhile, the outflow of money from the country will further increase, he said. 

"It is estimated that foreign workers, on average, send back some additional RM4 billion each year for every RM100 increase in minimum wages. Thus, the increase of RM300/400 will cause additional outflow of between RM12 billion to RM14 billion per year,” he said.

Legal foreign workers in the country currently remit an estimated RM34 billion annually to their countries of origin through official channels, he said. "The amount of yearly remittances would at least double, if the remittances through unofficial channels are also taken into account." 

Automation incentives, rebranding of 3D jobs proposed

Instead of raising the minimum wage, the MEF suggested that the government provide automation incentives to ensure that the entire job market is not
jeopardised by the implementation of future minimum wage rates.

It also proposed that jobs currently performed by foreign workers, which are generally shunned by locals as they are considered dirty, dangerous and difficult (3D jobs) because of the perception that they are demeaning and socially unacceptable, be rebranded to make them more attractive to locals.

As example, Syed Hussain said a rubbish collector can be rebranded as "hygiene associate", a gardener can be rebranded as "landscape associate", while a bus driver can be rebranded as "bus captain".  

"The rebranding of jobs should be supported by the introduction of higher mechanisation and better technology. Industry should be provided with the necessary support and incentives for automation and mechanisation," he said.

He further suggested that wages be linked to an employee's certified qualifications, be it for local or foreign workers.

“Currently, employees are not keen to seek for skill certification as such certification is not linked to the wages and those at the lower end of the spectrum are generally paid the minimum wages. Differentiation in wages between local workers and foreign workers should be based on certified skills. With certified skills and higher wages, locals would be attracted to perform the rebranded 3D jobs. Any negative stigma that is perceived by society in relation to the 3D jobs would be removed by the rebranding of jobs that must be supplemented with [a] clear career progression plan. This scenario is common in developed countries, such as in the UK and Japan, where locals take pride in performing such jobs,” he added. 

Tan Choe Choe