Predictably, Malaysia’s dramatic increase in the minimum wage before May 1 has not been favored by private sector businesses, but some economists say they may be justified.
The Malaysian government has decided to increase the national private sector monthly minimum wage by 25% from 1,200 ringgit ($275) to 1,500 ringgit ($344) in 57 major cities from May 1, 2022, from 1,100 ringgit Special ($252) up 35% ) to 1,500 ringgit elsewhere after two years of mandatory review. The last review and increase of the minimum wage was on February 1, 2020.
While low-income earners are naturally excited about the raises, the concerns expressed by businesses go beyond their normal dissatisfaction with the raises.
The government argues that it is raising the minimum wage again to support people suffering economic pain first caused by the Covid-19 pandemic and then exacerbated by Russia’s invasion of Ukraine and its impact on global supply chains and commodity prices .
drag on economic recovery
However, experts worry that higher working capital requirements from wage increases could erode corporate profits and investment readiness at a time when the economic recovery is expected to begin, effectively slowing the country’s recovery from the pandemic.
Businesses, especially manufacturers and SMEs, feel that the increase in the minimum wage in Malaysia is too fast and too steep, as many companies have not fully recovered from the pandemic to absorb the resulting costs.
Business representatives said the wage hike was “ill-timed” given rising external risks from the Chinese blockade, the Russia-Ukraine crisis, labour shortages and soaring raw material and commodity prices. In addition, many businesses, especially SMEs, still rely on government subsidies, and once these subsidies end, paying the increased wages will be an additional burden.
Minister says wage growth is predictable
In turn, Malaysia’s Human Resources Minister Saravanan Murugan said the 1,500 ringgit minimum wage was “really timely” and companies should expect such a move as the law mandates that the wage floor must be reviewed at least every two years.
He said several factors were taken into account, namely the increase in poverty line income, cost of living trends and inflation. The minister also reminded businesses that the median monthly salary in Malaysia in 2020 fell 13% to 1,894 ringgit ($434) from 2,185 ringgit ($501) in 2019 due to the pandemic, while an increase in the minimum wage is “expected to re-emerge. Stabilize wages for workers at the bottom of the payroll.”
Critics of the government say the planned minimum wage increase is politically motivated as Prime Minister Ismail Sabri Yaakob’s government expects general elections in late 2022. However, the government denies political motives.
Predictably, Malaysia’s dramatic increase in the minimum wage before May 1 has not been favored by private sector businesses, but some economists say they may be justified. The Malaysian government has decided to increase the national private sector monthly minimum wage by 25% from 1,200 ringgit ($275) to 1,500 ringgit ($344) in 57 major cities from May 1, 2022, from 1,100 ringgit Special ($252) up 35% ) to 1,500 ringgit elsewhere after two years of mandatory review. The last review and increase of the minimum wage was on February 1, 2020. Although low-income…
Predictably, Malaysia’s dramatic increase in the minimum wage before May 1 has not been favored by private sector businesses, but some economists say they may be justified.
The Malaysian government has decided to increase the national private sector monthly minimum wage by 25% from 1,200 ringgit ($275) to 1,500 ringgit ($344) in 57 major cities from May 1, 2022, from 1,100 ringgit Special ($252) up 35% ) to 1,500 ringgit elsewhere after two years of mandatory review. The last review and increase of the minimum wage was on February 1, 2020.
While low-income earners are naturally excited about the raises, the concerns expressed by businesses go beyond their normal dissatisfaction with the raises.
The government argues that it is raising the minimum wage again to support people suffering economic pain first caused by the Covid-19 pandemic and then exacerbated by Russia’s invasion of Ukraine and its impact on global supply chains and commodity prices .
drag on economic recovery
However, experts worry that higher working capital requirements from wage increases could erode corporate profits and investment readiness at a time when the economic recovery is expected to begin, effectively slowing the country’s recovery from the pandemic.
Businesses, especially manufacturers and SMEs, feel that the increase in the minimum wage in Malaysia is too fast and too steep, as many companies have not fully recovered from the pandemic to absorb the resulting costs.
Business representatives said the wage hike was “ill-timed” given rising external risks from the Chinese blockade, the Russia-Ukraine crisis, labour shortages and soaring raw material and commodity prices. In addition, many businesses, especially SMEs, still rely on government subsidies, and once these subsidies end, paying the increased wages will be an additional burden.
Minister says wage growth is predictable
In turn, Malaysia’s Human Resources Minister Saravanan Murugan said the 1,500 ringgit minimum wage was “really timely” and companies should expect such a move as the law mandates that the wage floor must be reviewed at least every two years.
He said several factors were taken into account, namely the increase in poverty line income, cost of living trends and inflation. The minister also reminded businesses that the median monthly salary in Malaysia in 2020 fell 13% to 1,894 ringgit ($434) from 2,185 ringgit ($501) in 2019 due to the pandemic, while an increase in the minimum wage is “expected to re-emerge. Stabilize wages for workers at the bottom of the payroll.”
Critics of the government say the planned minimum wage increase is politically motivated as Prime Minister Ismail Sabri Yaakob’s government expects general elections in late 2022. However, the government denies political motives.
