Senior workers may demand wage growth

“However, plantation companies that are purely based in East Malaysia is expected to see more pressure as the wage hike locally is significantly higher than their counterparts in Peninsular Malaysia.

“The first tranche of the wage increase due in Jan 1, 2019 represents a 5 per cent or RM50 increase to wages in Peninsular Malaysia and a 14.1 per cent or RM130 increase in East Malaysia.

“In addition, there could be a ripple effect on the entire company workforce as the more senior ranking officers might also demand similar wage growth,” added the research arm.

Besides this, Chai also pointed out that the wage hikes might reduce employment opportunities locally as employers would be slower in getting additional staff with increased cost of business operations in a prevailing deteriorating economy.

Expansion and growth rates in larger companies would likely not be impacted as much, but Chai predicts that they will probably expedite their automated process of production in order to cut labour costs in the long run.

While increased automation would reduce the number of employment opportunities available, some analysts have pointed out that this would not be an entirely negative development as the reduction of jobs would only be to the jobs that are low-skilled with a high percentage of foreign workers.

The reduction of such jobs is expected to reduce our reliance on foreign labour and in turn increase the number higher-skilled jobs available.

While not against an overall increase in minimum wages, Chai argued that the approach that the government has taken might too aggressive in the short-term and very considerate of the different economic circumstances in different regions in Malaysia.

“Ideally, I think there should not be any drastic change in the minimum wage at least for the next couple of years. In addition, the minimum wage should be regionalize and sectorial, having regards to the different costs of living in different areas and different levels of expectations from the employees in different sectors of employment.

“You cannot compare an administrative staff with a factory worker for example,” Chai argued.