Higher minimum wage not a silver bullet, but crucial for income growth, says Johan Merican

KUALA LUMPUR, Oct 13 — Treasury Secretary-General Tan Sri Johan Mahmood Merican clarified yesterday that the RM2,000 minimum wage rollout next June isn't a cure-all, but a crucial step for income growth. In a post-budget debate organized by the Malaysian Economic Association, Johan noted that wage growth has lagged behind rising living costs, driving household financial stress even as headline inflation stays manageable.

He emphasized that increasing people's earning potential is vital and that raising the minimum wage is a key part of this strategy, starting with large companies.

Johan stressed that the government's objectives extend beyond merely raising wages for entry-level workers to prevent wage compression, where pay boosts for the lowest tier unintentionally squeeze differentials while intermediate salaries remain flat. He expressed hope that large companies would also reassess their overall salary structures based on the increased minimum wage.

The government has mandated government-linked-companies (GLCs) to adopt a living wage baseline of RM3,400, setting a benchmark for the private sector to follow when determining salaries. Johan confirmed that this RM2,000 baseline was agreed upon by the National Wages Consultative Council, representing both trade unions and employers, without any disagreement.

While large businesses face a standard adjustment window, Johan revealed that small enterprises will receive an extended grace period to cope with operational cost impacts amid ongoing Middle East geopolitical tensions. Alongside the minimum wage and GLC living wage threshold, the government will continue its Progressive Wage Policy, and plans are underway to introduce a separate minimum wage tier for semi-skilled occupations.