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FMM worried about sharp increase in minimum wage

FMM In The News: MALAYSIAKINI, Tuesday, February 8, 2022 - The Federation of Malaysian Manufacturers (FMM) said it was deeply concerned following the announcement that the minimum wage may increase to around RM 1,500 a month before the year’s end.

FMM president Soh Thian Lai said business conditions remain fragile for many in the current circumstances of the pandemic.

"It must be recognised that any increase in business cost for manufacturers would have a spiralling multiplier impact on the economy and derail business and economic recovery.

"Adjustments to wages must be done progressively and consider multi-stakeholder impact," he said.

Soh (above) pointed out that the proposed increase from RM1,200 to RM1,500 per month, as announced by Human Resources Minister M Saravanan, is a 25 percent jump.

"Industries continue to face risks posed by the pandemic and the current Omicron variant that continues to impact global supply chains and logistic connectivity as well as other cost pressures due to rising commodity prices, energy prices, labour supply shortages, etc which could gravely derail business recovery efforts.

"As such, the proposal to increase the minimum wages by 25 percent to RM1,500 would have an undesirable impact on the economy, especially in the present circumstances as the wage adjustments would precipitate increases at higher wage levels as well," he added.

Saravanan, when making the announcement, said the new rate hadn’t been finalised as the ministry was awaiting cabinet approval.

Gradual increase preferred

Soh said manufacturers are concerned about an immediate increase to RM1,500 but are receptive to a gradual increase under a quantum to be decided by the National Wages Consultative Council (NWCC).

"In this regard, it is critical for a tripartite discussion to be convened urgently to consider the announcement by the minister and to ensure that the tripartite platform is further Human Resources Minister M Saravanan ensure that the tripartite platform is further expanded to ensure greater representation and diverse views from key stakeholders of the various economic sectors, including FMM as the voice of the manufacturing sector.

"We strongly feel that a more gradual increase in the wage rate would still be able to address the increase in the cost of living which we are all experiencing currently as a result of the pandemic and the supply disruptions that ensued," he said.

He went on to say that employers believe any increase in minimum wages must be commensurate with productivity increases.

This is because, he explained, any steep increases in wage costs could adversely affect the overall costs and competitiveness of businesses.

"We note that neighbouring countries such as Indonesia, Cambodia, and Thailand are also planning minimum wage adjustments in 2022 given that the price inflation is a global given that the price inflation is a global phenomenon.

"However, it is noted that the adjustments by these countries are very gradual, taking into consideration the effects of the pandemic on business sustainability as well," he said.

According to Soh, Indonesia is implementing an average increase of 1.09 percent while the review is still in progress for Thailand.

"Cambodia, which only imposes minimum wages for the garment, textile, and footwear industries, has introduced a minimum wage adjustment of around 1.04 percent.

"It should also be noted that these countries do not have one uniform minimum wage rate. Instead, the minimum wage rates are based on provincial locations or only imposed on certain sectors, unlike Malaysia," he added.

The FMM represents over 11,300 member companies (3,500 direct and 7,800 indirect) from the manufacturing supply chain.

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