Minimum Wage Will Cause Unemployment, Inflation, Say Employers, Economists

KUALA LUMPUR, May 3 — Putrajaya’s minimum wage policy will lead to surging unemployment, “black market” labour and inflationary pressure, employers and economists have warned. Datuk Seri Najib Razak announced on Monday a base wage of RM900 for the peninsula and RM800 in Sabah and Sarawak with a grace period of six months, or double that for micro-enterprises.

“When employers refuse to hire at the minimum wage, desperate workers will look to the black market and agree to take less than that,” said Wan Saiful Wan Jan, chief executive of libertarian think-tank Institute for Democracy and Economic Affairs.

“The irony is that the government introduced this to provide a social safety net but these workers will not have EPF or Socso,” he told The Malaysian Insider, referring to the state pension fund and social security organisation.

The government began working on a minimum wage policy last year after over a decade of pressure from labour unions during which productivity rose by 6.7 per cent annually but real wages inched up by just 2.6 per cent each year.

But it was delayed as stakeholders continued to pressure the government. Small-medium industries (SMIs) warned that 80 per cent of active businesses could fold under a blanket wage floor, cutting four million jobs from the labour market.

SMIs say they make up 99 per cent of operational companies and employ 59 per cent of all workers as they are the most labour-intensive outfits and will be hardest hit by a hike in wage bills.

SMI Association of Malaysia president Teh Kee Sin told The Malaysian Insider they would need at least three years to “train and upgrade technology” to ensure enough productivity gains to justify an additional cost of up to 9 per cent due to the minimum wage rate.

Malaysian Employers Federation executive director Shamsuddin Bardan also said that in some cases, such as plantation workers in Sabah, a minimum wage of RM800 would double salaries.

“Many are going to contract and...