IMMEDIATE INCREASE IN MINIMUM WAGE MAY REVERSE BUSINESS RECOVERY -- FMM

KUALA  LUMPUR, April 28 (Bernama) -- The Federation of Malaysian Manufacturers (FMM) has raised concerns that the immediate jump to RM1,500 for minimum wage from May 1 may result in a steep cost increase and reverse the otherwise optimistic business recovery for 2022.

President Tan Sri Soh Thian Lai said the increase from the current RM1,200/RM1,100 to RM1,500 represents an immediate increase of 25-36 per cent on the basic salary which will have a tremendous knock-on effect on the overall payroll cost and have a spiralling impact on business cost that could potentially derail the economic recovery.

“The industry has repeatedly affirmed that it is supportive of a review of the minimum wages but based on the current economic factors where the business environment continues to be fragile, a progressive adjustment with a RM150 increase in 2022 and a further increase of RM150 in 2023 to reach the RM1,500 minimum wage would be more manageable for the industry,” he said in a statement.

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“The small and medium enterprises (SMEs), especially those in the suburban areas would be most impacted by this sharp rise in wage cost given that only the micro-enterprises will be exempted for a period of eight months until December 2022,” he added.

Soh said the economy would also see an immediate monthly outflow of close to RM500 million with the repatriation of funds by foreign workers (based on 1.6 million legal foreign workers) with no direct positive impact on the local economy.

"As it is, the industry is facing an influx of cost increases as businesses continue to rebuild their performance to the pre-pandemic levels, including raw materials cost, logistics cost, and higher energy prices due to the rising commodity prices.

"Ultimately, the increase in minimum wages is going to further push cost of production and lead to greater inflationary pressures,” he added.

-- BERNAMA