KUALA LUMPUR: Some economists have strongly suggested that the minimum wage should be increased by at least 33 per cent to RM2,000 a month as the current RM1,500 is below the cost of living.

The suggested figure is also higher than the RM1,700 purportedly to be recommended by the Human Resources Ministry under the upcoming 2025 Budget.

Last month, Human Resources Minister Steven Sim said the proposal for a new minimum wage was expected to be presented to Cabinet in September.

According to Chinese portal Nanyang Siang Pau, the ministry planned to propose raising the minimum wage to RM1,700 from RM1,500 or an increase of 13.3 per cent based on the National Wages Consultative Council Act 2011.

Economist Dr Geoffrey Williams said based on the Statistic Department data, 10 per cent of Malaysians in formal jobs earn RM1,500 or less.

If the minimum wage is raised to RM1,700 per month, he said 10 per cent or 600,000 will see their wage rise.

"Foreign workers who account for around two million people are impacted by low-paid jobs. So industries that employ large numbers of foreign workers will be impacted and these workers will suffer more because they have fewer rights," he added.

Williams said the government needs to aim for a minimum wage of RM2,500-RM3,000 per month.

"Of course employers will oppose this. A simple solution is to remove all the restrictions on the progressive wage model (PWM) and Sumbangan Tunai Rahmah STR) and pay employees the RM200-RM300 PWM amount directly through the Inland Revenue Board or Padu.

"This means the minimum wage should be RM2,200 and it should be topped up to RM2,500 through the reverse income tax credit that will help employees and employers directly and efficiently without wastage, leakages and corruption," he added.

UniKL Business School economic analyst associate professor Dr Aimi Zulhazmi Abdul Rashid said the minimum salary should be move once for all to RM2,000 in line with the wages restructuring of the government recently as well as some private sectors like banks' employees, who have a 9.0 per cent increment.

"It should be across the board as it will allow the whole business chains to adjust to the higher minimum wages.

"In fact, it should be revised at least every five years or earlier depending on the industry need and the government drive to make Malaysia a higher income nation by 2030 as per Madani Economy Plan," he said.

IDEAS Malaysia economist and assistant research manager Doris Liew said wage hike will hit sectors with low median wages the most.

This includes the food and bevarage (F&B) industry as well as textile, wearing apparel, and leather product manufacturing.

Furthermore, she said businesses in rural areas particularly in Kedah, Sabah, Perlis, and Kelantan, among states with the lowest median wages, will also be significantly affected. 

"20 per cent of our workforce earns below RM1,700 a month, primarily in the low-wage sectors mentioned above.  

"However, these sectors should strive to increase productivity through technology instead of relying solely on low-wage workers to reduce costs," she told Business Times.

Liew said a single individual in Kuala Lumpur, for example, needs at least RM2,700 to live comfortably.

Even after adjustments, she said the minimum wage of RM1,700 falls short of this standard.

Given the strong wage growth and recovering labour market, she said the minimum wage should be adjusted to reflect the strong economy.

"Instead of setting one national minimum wage, the government could consider implementing sectoral, occupational or state-varied minimum wages to address regional cost of living differences while mitigating the impact on businesses with low profit margins, such as micro and small enterprises.

"Countries like the United State and Brazil have national wages with potential for higher regional wages, while India and South Africa have different minimum wages based on occupation," Liew added.

Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman said the government may consider exempting micro, small and medium enterprises (MSMEs) them from the coverage of the minimum wages application as being  done in the US, Japan and South Korea.

He explained that MSMEs are  mostly still experiencing cash flow problems and shrinking operating margins mostly at 10 per cent or less.

He also suggested that the government can also assist micro and small employers by providing cash incentives as being done under the progressive wage policy.

"It should be noted that the cost to employers is not just the minimum wage cost because it include Employees Provident Fund (EPF), Social Security Organisation (Sosco), Employment Insurance System (EIS) HRD Corp and other benefits.

"The majority of MSMEs have not fully recovered from  on cash flow challenges, thus we must be sensitive to protect the backbone of employment," he added.

https://www.nst.com.my/business/economy/2024/09/1105492/minimum-wage-make-it-least-rm2000