Minimum wage hike will also raise operating costs, property prices, says group

The Master Builders Association Malaysia (MBAM) has warned that a proposed minimum wage increase could lead to higher operating costs for the construction sector, potentially causing property prices and project expenses to rise as well. Master Builders Association Malaysia president Kenneth Liew explained that the industry's reliance on foreign workers means the additional expenses wouldn't simply be limited to basic wages; they would also encompass overtime rates and related payments.

Liew noted that labor costs form a significant portion of construction industry expenses, suggesting that any wage increase would likely impact employers' financial burdens. He also pointed out that many contractors are bound by fixed-price contracts signed prior to the review, limiting their ability to pass on the extra costs directly to buyers.

This could ultimately reflect in project costs and property prices if the financial burden isn't evenly distributed, Liew stated in his comments to FMT. To mitigate potential pressure, Liew proposed a staged implementation of the minimum wage hike through industry consultations, coupled with a price adjustment mechanism for existing public and private sector contracts.

Tukiman Radion, president of the Persatuan Kontraktor Bumiputera Kelas F Malaysia, clarified that the wage structure adjustment might not directly affect most small contractors. While a large share of their workforce comprises freelancers or family members, Radion warned that the hike could impose challenges on contractors utilizing permanent employees for maintenance and cleaning tasks.

He explained that projects managed by small contractors often revolve around outdated pricing, and permanent workers are inclined to demand higher wages following a minimum wage increase, whereas contractors receive the same payments from customers. The Malaysian human resources minister, R Ramanan, announced on August 18 that the government was reviewing the RM1,700 minimum wage, with the final decision on whether to sustain or raise the rate resting with the National Wages and Gig Economy Consultative Council.

The specifics regarding a possible wage increase are anticipated to be disclosed during the presentation of the 2027 budget on October 9. The minister of entrepreneur development and cooperatives, Steven Sim, has affirmed that micro, small, and medium-sized enterprises would be temporarily exempt from further minimum wage increases.