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Maintain Minimum Wage Rates At Current Level

PRESS RELEASE

The Federation of Malaysian Manufacturers (FMM) strongly recommends that the current minimum wage rate at RM1,000 for Peninsular Malaysia and RM920 for Sabah & Sarawak should be maintained in the medium term given that the industry is facing hefty increases in the cost of doing business. Any increase in the immediate term should be deferred.

The call by several parties to raise minimum wage from RM1,000 to RM1,500 for Peninsular Malaysia is an excessive increase compared to the Government’s more reasonable and gradual increase of RM100 or 10% in July 2016. Any increase to the rates must be gradual and cannot be drastic.

Minimum wage at RM1,500 is too high a basic wage especially for unskilled workers and new entrants to the job market. In manufacturing, workers are paid allowances on top of basic wage. Take home pay is higher than minimum wage. A high basic wage affects overtime, increments and bonus payments. There are also knock-on effects on wages across-the-board, all of which could force companies to restructure, including possibly reducing employment opportunities, to address the strong wage push and spiralling costs of doing business.

Based on the Department of Statistics (DOS) Salaries and Wages Report 2016, released in July 2017, the manufacturing sector employed 1,198,300 workers at an average salary of RM2,129 a month. A RM500 increase in basic salary across-the-board means an additional labour cost of over RM599 million a month for manufacturing and RM6.8 billion a month for the overall economy (RM500 x 13.6 million total employment (excluding public service) based on DOS Labour Force Survey 1H2017 published in the Economic Report 2017/2018). The average salary of plant and machine operators is also already at RM1,662 per month. At RM1,500, Malaysia would have the highest minimum wage rate in ASEAN (excluding Singapore). 

Monthly Minimum Wage Rate
(as at January 31, 2017)

Country

USD

Ringgit Malaysia

Myanmar

78.40

348.13

Laos

107.88

479.03

Cambodia

140

621.72

Philippines

204.71 –  227.90

909.11 – 1,011.31

Indonesia

86.14 – 232.19

382.25 – 1,030.34

Malaysia

225.15 – 207.14

920 – 1,000

Thailand

259.92

1,143

Vietnam

136.75 – 154.40

600 - 680

Source: Statistik Pekerjaan & Perburuhan Siri 14 Bil 4/2017, Kementerian Sumber Manusia Malaysia

Companies need to stabilise operations following wage adjustments to the last increase in minimum wage in July 2016; and other concurrent increases in the costs of doing business in 2016 and 2017.

The Government should not be pressured to increase minimum wage rates. Although required under the National Wages Consultative Council Act 2011, a review of minimum wage rate once in every two years should not mean a continual and certainly not a drastic increase. Companies have been fair and continue to give increments and bonuses to workers. FMM is strongly of the view that the current rate should be maintained in the meantime to offer companies stability and time to adjust to cost increases.

The Government should carry out a thorough survey to gather data from employers on their capacity to continually absorb increasingly rising costs of doing business especially labour related costs.There is need to engage all relevant stakeholders and conduct a Regulatory Impact Assessment on cost increases.

Minimum wage must commensurate with productivity gains. The more important focus is to ensure wages is in tandem with productivity growth, as well as differences in cost of living and economica ctivity between states and zones, as provided in the NWCC Act and practised for private security guards. Raising the minimum wage rate in a drastic manner could worsen huge outflows of foreign exchange through workers’ remittances, which is also of concern to the Government.

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