While SMEs account for about 98% of local businesses and play a crucial role in Malaysia’s economy, Shamsuddin said they often act as training grounds for larger corporations.

“After a few years of experience at SMEs, employees become more marketable and are often lured away by bigger companies offering better salaries,” he said in a forum at the 11th Malaysia Statistics Conference here today.

Shamsuddin said that the progressive wage model could help address this issue by offering a higher base salary than the current minimum wage in Malaysia.

The minimum wage in Malaysia is currently set at RM1,500.

With progressive wage guidelines recommending a starting salary of at least RM1,810 for entry-level positions, adopting this model could help SMEs attract better candidates and level the playing field for these businesses, he said.

“Under the progressive wage model, there is a policy to ensure that even those on the highest salary receive the necessary training and upskilling,” Shamsuddin said.

However, he cautioned that implementing a progressive wage model does not automatically translate to increased productivity, describing it as “wishful thinking.”

He cited a study by the Malaysia Productivity Corporation (MPC) conducted from 2011 to 2019, which found that wage increases outpaced productivity growth by 1.3% annually.

“(Investing in upskilling and wage increases) would also incur additional costs with no guarantee that productivity will rise as a result,” Shamsuddin said.