Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan said he was surprised that the new RM1,200 minimum wage for “major cities” announced in Budget 2020 included 42 smaller towns.
“According to the housing and local government ministry gazette, there are only 15 city councils, but what was announced was that the new minimum wage would apply to 57 cities and towns,” he told FMT.
It was reported that the government had mandated a RM1,200 monthly minimum wage in 57 cities and towns starting Jan 1, 2020. Outside of these areas, the existing RM1,100 rate applies.
Shamsuddin said business was not good for many companies and that many were trying to avoid retrenchment.
“The situation is especially bad for some industries like media and retail,” he said. “We’ve seen companies like Giant and Cold Storage announcing the closure of stores because of the economic climate.”
Up until September this year, Shamsuddin added, some 23,000 people had been retrenched. He expects this figure to hit the 30,000 mark by the end of the month.
He also urged the government to bear in mind that the main beneficiaries of the increase in minimum wage would be foreigners as many Malaysians are already paid above this amount.
“Foreign workers will remit most of their earnings back, so their increased wages will not benefit the local economy,” he said, adding that businesses would incur higher costs which would in turn be passed to consumers.
“So Malaysians will end up paying more for goods and services.”
The Malaysian Trades Union Congress (MTUC), while welcoming the increase in minimum wage, said it was unfortunate that the government had made the announcement without effective consultation with stakeholders.
The group’s secretary-general J Solomon also questioned the government’s move to go back to a two-tiered minimum wage after harmonising it following the 14th general election.
“Now we are back to square one,” he added. “Malaysia is not geographically big like Indonesia, India or China to have different minimum wage scales.”
He also questioned how the government would ensure fair implementation of the new rates, giving the example of those who live in cities but work in areas where the RM1,100 rate is applied.
“Is RM1,200 really sufficient to live a decent life? MTUC asked for RM1,800 after a regional study but this is far from becoming a reality.”
Federation of Malaysian Manufacturers vice-president Nathan K Suppiah urged the government to honour its manifesto promise of sharing any increase in minimum wage equally with employers.
“We suggest the government’s 50% share of that increase be in the form of direct subsidies to local workers,” he said, adding however that the bigger issue was for the minimum wage to be commensurate with productivity gains.
“Most companies are already struggling with increased costs. More effort must be made to ensure that productivity increases in tandem with higher wages.”
Klang MP Charles Santiago, an economist by training, said although the RM1,200 minimum wage was not enough, it showed that the government recognised the need to increase wages.
He said the government should look at introducing a living wage rather than a minimum wage.
“I think the implementation of the new rate could be problematic because 87% of Malaysians live in urban areas where costs of living are high, but not all urban areas are covered in the 57 towns and cities.
“For example, some businesses in Kapar may argue that their area does not fall under Klang town though it is next door, so the minimum wage should be standardised across the board.”