KUALA LUMPUR: Malaysia needs a more sustainable approach to wage growth, with higher wages linked to productivity, skills development and stronger business performance rather than relying solely on increases in the statutory minimum wage.
This was the view of the Malaysian Employers Federation (MEF), which stressed that the government’s review of the RM1,700 minimum wage should be based on evidence and a range of economic indicators.
Responding to news that Human Resources Minister Datuk Seri R. Ramanan said the government is reviewing the minimum wage, MEF president Datuk Dr Syed Hussein Syed Husman said the federation respected the government’s decision.
“However, there should be no automatic increase at this juncture,” Syed Hussein told Twentytwo13 today.
“Employers, particularly micro, small and medium enterprises (MSMEs) and labour-intensive businesses, are still adjusting to the impact of the current RM1,700 rate.
“Any decision on a further increase should take into account labour productivity, business operating costs, wage growth, inflation, employment conditions and the capacity of different sectors to absorb higher labour costs.”
Syed Hussein said the question should not be “how much can wages be increased?” but “how can wages be increased without reducing employment opportunities?”
“A significant increase in labour costs could place pressure on businesses, particularly those operating on tight margins, and could affect recruitment, expansion, pricing, working hours and investment decisions,” he said.
“A higher minimum wage can have a wider impact across the entire wage structure, potentially resulting in wage compression and a much larger increase in total employment costs than the headline minimum-wage increase suggests.”
He said the impact would be particularly significant for MSMEs and micro-enterprises, labour-intensive industries, retail, hospitality, food services and tourism, manufacturing and selected services, as well as businesses operating on low margins and those competing internationally on cost.
Syed Hussein said excessive increases could also accelerate automation and reduce demand for lower-skilled workers if businesses sought to offset higher labour costs through technology.
He stressed that a living-wage benchmark should not automatically be converted into the statutory minimum wage.
He said living-wage requirements could differ according to location, household circumstances and other factors, and cautioned against using a single living-wage figure as the statutory minimum wage for all employers and all parts of Malaysia.
He noted that the approximately RM3,100 monthly living-wage benchmark adopted under the government’s GEAR-uP initiative highlighted the significant distinction between a living-wage benchmark and the current statutory minimum wage.
“MEF’s concern is that converting a living-wage benchmark directly into a statutory minimum wage could create a substantial and sudden cost shock for businesses,” he said.
“Living wages could be better promoted through productivity-linked wage practices, skills development, better-quality jobs and voluntary employer initiatives.”
He said employers should be encouraged to link wage increases to productivity, skills, performance and business results, creating a sustainable mechanism in which higher wages are supported by higher economic value.
“At the same time, MSMEs should receive targeted assistance to invest in automation, digitalisation, technology and skills upgrading so they can generate the productivity gains needed to support better wages,” he said.
“The government should also look at the total cost of employing a worker. Wage increases should not be considered in isolation from statutory contributions, levies, regulatory compliance and other employment-related costs.”
Syed Hussein also called for stronger industry-led technical and vocational education and training (TVET), reskilling and upskilling to equip Malaysian workers with higher-value skills that can command higher wages.
“Malaysia needs workers with higher-value skills that command higher wages. Industry-led TVET, reskilling and upskilling should therefore be significantly strengthened,” he said.
“Higher wages must ultimately be supported by higher productivity. Sustainable wage growth cannot be achieved indefinitely by increasing labour costs alone.”
