KUCHING: The debate on minimum wage adjustments in East Malaysia is both timely and crucial amid rising living costs, but any increase must be structured and gradual to avoid economic instability.
Economist Farhana Ismail said while raising wages is necessary, a sudden hike could lead to inflationary pressures as businesses may offset higher labour costs by raising prices.
“A balanced and well-planned approach is essential to ensure that higher wages genuinely improve workers’ livelihoods without destabilising the economy.
“At the same time, it is crucial to recognise economic realities,” said Farhana, a senior lecturer at the Faculty of Economics and Business in Universiti Malaysia Sarawak (Unimas) here.
In stating this, she pointed out that businesses, especially small and medium enterprises (SMEs) could struggle to cope with abrupt wage hikes during periods of slow economic growth
“Theoretically speaking, when the minimum wage is set above the equilibrium level, it can lead to unemployment, as higher labour costs may prompt employers to reduce hiring or even downsize their workforce.
“Thus, any wage adjustment should strike a careful balance between improving workers’ livelihoods and ensuring economic sustainability,” she said.
However, she noted that increasing wages does not necessarily harm businesses, if implemented strategically.
Farhana explained that theoretically, offering wages above the equilibrium level can lead to higher productivity, improved employee retention, and enhanced overall firm performance.
Practically, on the other hand, she said by investing in competitive wages, businesses can cultivate a more motivated, skilled, and efficient workforce, ultimately driving long-term growth and sustainability.
“All in all, I believe that while raising the minimum wage is necessary to address the rising cost of living and ensure fair compensation, it must be implemented with careful planning and consideration.
“A gradual and well-structured approach, aligned with economic conditions and business capabilities, is the most sustainable path forward.
“Striking a balance between fair wages and economic stability is crucial to ensuring long-term benefits for both workers and businesses,” she said.
Sarawak Bank Employees Union CEO Andrew Lo recently called for the minimum wage in Sarawak and Sabah to be raised to RM2,125, a 25 per cent increase from the newly revised RM1,700 rate.
He said a higher minimum wage in East Malaysia was necessary to reflect the higher cost of living in Sabah and Sarawak, due to logistical challenges and the vast geographical area.
