Graduate salary floor must balance pay and jobs, economists say

KUALA LUMPUR: Economists argue that a mandatory minimum starting salary for graduates must balance wage increases with employers' ability to recruit and sustain staff, the New Straits Times reports. The Human Resources Ministry plans to release guidelines on starting salaries for graduates and semi-skilled workers by June 2027, following Budget 2027's proposal of a RM2,500 minimum starting salary.

Datuk Seri R. Ramanan, the ministry's minister, said these guidelines would offer employers and workers a reference for basic salaries based on occupation, education, and skills. Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi Mara, stressed the need for clear eligibility criteria to boost graduate wages without jeopardizing employment opportunities.

He urged the government to consider employers' financial capacity, particularly in small and medium enterprises (SMEs), before making the proposed salary requirements mandatory. Idham forewarned that some SMEs might become more selective in hiring fresh graduates if the mandatory salary exceeded what they could justify based on current productivity.

Businesses could respond by cutting new hires, favoring experienced candidates, or automating tasks, Idham explained. He recommended a phased implementation or targeted aid for businesses grappling with the new requirements. Ida Md Yasin, an economic analyst at Putra Business School, acknowledged that a RM2,500 minimum starting salary would boost graduates' purchasing power amid rising living costs and could function as a benchmark.

However, she cautioned that employers seeking skilled workers might need to offer higher salaries. Ida also noted that higher labour costs could raise prices for goods and services, particularly affecting SMEs, and warned against assuming all SMEs would struggle to meet the proposed salary floor, as their financial capacity varied based on business performance and profit margins.

She suggested that the government should account for differences across industries and job requirements before making the guidelines obligatory, stressing that salaries should reflect the knowledge and skills required for each position, especially as routine and repetitive tasks become automated.