Adjustments must be balanced between workers being able to afford necessities and business survival: Expert

PETALING JAYA: The current minimum wage in Malaysia does not align with the rising cost of food and is not a living wage that prevents the lower income groups from falling below the poverty line as it does not keep pace with inflation and increases in the cost of living, said Academy of Sciences Malaysia fellow Datuk Dr Madeline Berma.

She was commenting on a minimum wage study involving 67 countries by e-commerce company Picodi Malaysia, which revealed that Malaysia ranked 59th.

The study showed the net minimum wage in Malaysia remained constant at RM1,323, with basic groceries alone costing about RM437.58 (33.1%) of the amount, reflecting an increase from 30.6% in 2023.

Berma said many employees working full-time and earning minimum wage faced difficulty paying for food, housing, transportation, childcare and healthcare.

Meanwhile, Bank Muamalat Malaysia Berhad chief economist Dr Mohd Afzanizam Abdul Rashid said adjusting the minimum wage requires a multifaceted approach.

“There needs to be a balance between ensuring employees can afford to pay for their living costs amid rising expenses, and simultaneously making sure businesses can manage their overhead costs and payroll.

“The adjustments should be made at predefined intervals to allow businesses to plan. This approach was formalised with the establishment of the National Wages Consultative Council Act 2011.”

Mohd Afzanizam said necessities accounted for 29.5% of the total Consumer Price Index (CPI) and is the largest share within the CPI basket.

“Thus far, prices within this category increased at a rate of 4.8% in 2023, slightly lower than the 5.7% recorded in 2022, which means the CPI basket is an important driver of general inflation.

“The anticipated increase in the prices of necessities implies that the purchasing power among Malaysians will be eroded, and individuals within the minimum wage bracket will experience the impact as their net income is reduced.”

Universiti Putra Malaysia Putra Business School economist Assoc Prof Dr Ida Md Yasin said the minimum wage is influenced by the principles of supply and demand within the labour force.

“When labour supply decreases, wages will rise. The minimum wage is already high in sectors such as oil and gas, while it remains low in less-skilled occupations like the food and beverage sector.

“But the manufacturing industry seems complacent and shows a preference for employing foreign workers over investing in machinery and automation due to cost savings.”

Ida said increasing the minimum wage might also cause industries to struggle with payroll issues, which could potentially result in higher unemployment rates.

However, she said salary levels do not always align with the educational qualifications of certain individuals since many industries prioritise experience in deciding higher compensation.

“While providing numerous employment opportunities, the government must concurrently prioritise the development of a skilled workforce.

“Its intervention is vital to prevent unfair industry practices, but the sectors have different pay structures. Individuals seeking a job must navigate the market carefully.”

Ida encouraged individuals to diversify their job prospects and evaluate if their skills could be transferred to other sectors.

“This includes considering options to earn more, such as through a side business or engaging in the gig sector. These are choices that are increasingly favoured today.

“Individuals should also actively pursue alternative opportunities and steer clear of relying excessively on the government,” she said.