KUCHING: The proposal to increase the minimum wage in East Malaysia is both timely and justified; however, a hasty implementation could harm businesses and the economy, said economist Nivakan Sritharan.
Commenting on Sarawak Bank Employees Union CEO Andrew Lo’s call for the minimum wage in East Malaysia to be set at RM2,125, the lecturer from the Faculty of Business, Design and Arts at the Swinburne University of Technology Sarawak Campus opined that a sudden hike without adequate support mechanisms could strain small businesses, potentially leading to job losses, reduced hiring, and increased prices for goods and services.
“I support the wage increase, but it should be phased in gradually with government support for businesses and workforce development programmes.
“Higher wages are expected to boost productivity by enhancing employee motivation and reducing turnover rates, leading to a more engaged and efficient workforce.
“However, the increased labour costs associated with these higher wages can place significant financial strain on businesses, particularly small and medium enterprises, which may not have the profit margins to absorb these expenses,” he said when contacted by Sarawak Tribune.
He further explained that this financial pressure could compel businesses to cut jobs, reduce working hours, or halt expansion plans as cost-cutting measures, directly contradicting the objective of fostering economic growth through increased employment and productivity.
While higher wages can increase consumer spending, inflationary pressures may offset this benefit.
He stated that as businesses face higher operating costs, they may pass these costs on to consumers in the form of increased prices for goods and services, thereby diminishing the real purchasing power of workers and neutralising the intended benefits of the wage increase.
“To mitigate the gaps identified between the advantages and disadvantages of the minimum wage increase, a multi-faceted approach is essential.
“Gradual implementation of the wage hike through phased increments will provide businesses with the necessary time to adapt to the new cost structures, minimising the risk of sudden job losses or price hikes,” he said.
Nivakan stressed that supporting small and medium enterprises (SMEs) is critical and can be achieved by offering tax incentives, subsidies, or low-interest loans to help them manage increased labour costs without resorting to workforce reductions.
“Additionally, investing in workforce development through training and upskilling programmes will enhance employee productivity, enabling businesses to offset higher wages with efficiency gains.
“Promoting regional economic development by encouraging investments in infrastructure and offering economic incentives can further stimulate growth, making East Malaysia’s economy more resilient to wage-related cost pressures.
“Also, establishing a wage review committee to continuously monitor and evaluate the policy’s impact will ensure data-driven adjustments, allowing for timely interventions to address emerging challenges and optimise the benefits of the minimum wage increase,” he said.
