MEF: RM1,500 Minimum Wage Will Not Only Kill Businesses But Also Derail Economic Recovery

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Therefore, MEF wants the government to scrap the proposal, saying such a move "will kill businesses".

In a statement today, 6 February, MEF president Syed Hussain Syed Husman said that the majority of Malaysian businesses are not in a position to the proposed new minimum wage because they are still reeling from the economic shock brought about by the COVID-19 pandemic and the recent floods.

"The new minimum wage will push up the cost of goods and services. Operational costs will definitely increase, so this is not the right time," Syed said, adding that even a small increase in costs, like the increase in the minimum wage, can cause small and medium-sized businesses to shut down.

Instead, the federation wants the government to direct more efforts towards the economic recovery of the private sector along with controlling the rising cost of products and services in the country.

The MEF's statement comes after Human Resources Minister Datuk Seri Saravanan Murugan said a new minimum wage of "around RM1,500 a month" is expected to be implemented before the end of 2022.

Acknowledging that Malaysia was slow to decide on the matter, Saravanan told Berita Harian that the Ministry of Human Resources (MOHR) is doing what it can to hasten the process.

He, however, clarified that the new rate has yet to be finalised, as the ministry was awaiting Cabinet approval. The minimum wage was last increased in February 2020, from RM1,100 to RM1,200 per month.

"We must remember that most Malaysian businesses are micro, small, and medium enterprises (MSMEs), 98.9% are in this group. So, when we talk about wages and cost, we must think of their survival and sustainability. MSMEs are suffering and even [with] a small increase in their cost, they will suffer and close down, what more an increase of RM300/400 per month on top of existing national minimum wages.

"The fact remains that currently, many employers continue to face severe challenges to remain sustainable. The grim economic scenario does not allow any space for an increase in existing minimum wages," he said, adding that policymakers should keep this in mind before increasing the national minimum wages.

According to Syed, the proposed RM1,500 new minimum wage will result in higher unemployment and business debts, as companies will be unable to service their loans.

"MSMEs will really suffer. Some are saying it is better for them to move their operations to other ASEAN countries where the overall cost of doing business is much cheaper," he added.

Syed claimed that raising the minimum wage was not the solution for workers to earn higher wages, and that remuneration should be based on the performance of employees and profitability of employers.

And this in turn will demotivate the employees whose current wages are well above the minimum wage.

Additionally, the outflow of money from the country will further increase, he said.

"It is estimated that foreign workers, on average, send back some additional RM4 billion each year for every RM100 increase in minimum wages. Thus, the increase of RM300/400 will cause an additional outflow of between RM12 billion to RM14 billion per year,” he said, adding that at present, it is estimated that legal migrant workers are remitting about RM34 billion a year through official channels to the source countries.

As an example, Syed said a rubbish collector can be rebranded as a "hygiene associate", a gardener can be rebranded as a "landscape associate", while a bus driver can be rebranded as a "bus captain".

"The rebranding of jobs should be supported by the introduction of higher mechanisation and better technology. The industry should be provided with the necessary support and incentives for automation and mechanisation," he said.