Concerns linger over higher minimum wage

PETALING JAYA: MARC Ratings Bhd is concerned about the unprecedented implementation of a 25%, or RM300, increase in the minimum monthly wage as it comes at a time when the Malaysian economy has yet to fully recover from one of its worst economic crises.

The rating agency is concerned about the grace period and exemption given to micro, small and medium enterprises.

“The exclusions would blunt wage growth impact and subsequently diminish the objective of imposing a minimum wage level. It means statutory minimum wage level is higher than what it is in practice.”

MARC said the minimum wage level should be set at the lowest pay level across economic sectors, workers and regions. It suggested that the focus should be on an hourly, rather than monthly, basis.

MARC also said minimum wage should not be used as a tool to substitute efforts at real wageenhancing economic activities such as infrastructure investments and economic liberalisation.

However, it agreed that a higher minimum wage is warranted. It revitalises the overall wage growth which has lost steam, benefits Malaysian workers with low or no formal education, workers in the East Coast states of the peninsula, female workers, lowly paid occupations and industries, and ethnic minorities and narrow pay gap between Malaysian and noncitizen workers, urban-rural, education attainment, and gender.

A new minimum wage level will support the push in the wage-togross domestic product ratio higher towards the 12th Malaysia Plan target of 40% by 2025.

Meanwhile, the Federation of Malaysian Manufacturers (FMM) is calling the government to ease the cost impact of the higher minimum wage by providing all affected employers a wage credit or subsidy.

FMM said it is disappointed that the implementation of higher minimum wage is not a “progressive adjustment”.

“There is grave fear that the immediate jump to RM1,500 minimum wages will result in a steep cost increase and reverse the otherwise optimistic business recovery for 2022.”

FMM said it is supportive of a review of the minimum wages but based on the current economic factors. It added that a progressive adjustment with a RM150 increase in 2022 and a further increase of RM150 in 2023 to reach the RM1,500 minimum wage will be more manageable.

“The increase will have a tremendous effect to the overall payroll cost and impact business cost that could potentially derail economic recovery.”