NST Leader: Artful compromise on wages and inflation
A GOVERNMENT-MANDATED minimum wage policy often puts the government on the horns of a dilemma: balancing pressures from workers demanding better wages to keep pace with inflation with the ability of employers to keep up with a wage-increase spiral.
The government has devised a delicate balance in its minimum wage policy, aiming to address workers' demands for increased wages in the face of inflation while considering the ability of businesses to sustain higher costs. Minister Steven Sim of Entrepreneur and Cooperatives Development announced a temporary exemption from proposed minimum wage hikes for micro, small, and medium enterprises (MSMEs), acknowledging that a blanket increase would affect businesses differently.
MSMEs constitute 39.7% of the gross domestic product and employ nearly 1.3 million, making their capacity to absorb further labour cost increases questionable. However, the exemption should not be seen as a long-term solution, as it may disadvantage MSMEs in recruiting workers who will likely seek employment at companies offering the new minimum wage.
The government should encourage businesses to focus on improving productivity, and the Progressive Wage Policy, which ties wage subsidies to productivity gains, could be a viable option. The SME Association of Malaysia president, Dr. Chin Chee Seong, suggested additional steps such as investments in productivity improvements, digitization, and staff training.
The government should also monitor foreign-owned businesses, particularly in the service industry, which compete with and undercut local MSMEs. While government-mandated interventions like wage subsidies may provide short-term relief, businesses must ultimately find ways to thrive independently in a highly globalized market.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
