Sheda: Minimum wage hike may increase unemployment rate

KUCHING (Feb 8): An increase of the minimum wage may lead to an increase of unemployment rate as employers may end up hiring fewer workers due to the high cost, said Sarawak Housing and Real Estate Developers’ Association (Sheda) president Augustine Wong Chung Ho.

According to a report by New Straits Times, Wong said that the negative impact of higher minimum wage can only be offset by increasing worker’s productivity or companies hiring less manpower.

“Some employers are forced to pay more in wages, hence they will end up having fewer workers while workers who were perhaps willing to work for lower wages would be denied work opportunities as a result of government (or increased) minimum wage,” he said, quoted by New Straits Times.

He noted that it is not sustainable to increase the minimum wage without finding out the underlying reasons for low minimum income. He added that a hike in minimum wage has also promoted an increase in the price of goods.

In a statement on Feb 6, Wong said that the objective in increasing the minimum wage is to increase the spending power of workers which in turn spur the economy. However, he noted that it might give the opposite effect.

“This is because lower and middle income households tend to spend a larger percentage of their income on consumable goods, of which prices unfortunately would have increased as a result,” he said.

Instead, Wong suggested that study should be done to understand the underlying problems of the economic issues to ensure Malaysia remains competitive globally as an investment destination.

“Otherwise, a wage increase will only result in another round of inflation where minimum wage earners lose their jobs while their cost of living still increases,” he added.

Malaysia’s minimum wage currently stands at RM1,200 per month. It was raised from RM1,100 per month in February 2020.

Human Resources Minister Datuk Seri Saravanan Murugan said on Feb 6 that a new minimum wage of Rm1,500 is expected to be implemented this year. The new rate is yet to be finalised as it is still waiting for the Cabinet approval.

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