KUCHING: Increasing the minimum wage could eventually lead to a higher unemployment rate as some employers and companies would end up hiring fewer workers.
Sarawak Housing and Real Estate Developers' Association (Sheda) president Augustine Wong Chung Ho said the negative impact of a higher minimum wage can only be offset by increased productivity by workers or having companies trimming down their manpower.
"Some employers are forced to pay more in wages, hence they will end up hiring fewer workers while workers who were perhaps willing to work for lower wages would be denied work opportunities as a result of government mandated (or increased) minimum wage," he said.
Wong said increasing the minimum wage without examining the underlying problems and cause of low minimum income will not be sustainable.
Apart from that, he said, based on previous experiences, minimum wage hikes have proven to cause prices of goods to rise.
"The objective of raising the minimum wage with the hope that it will increase the spending power of workers via higher wages that will stimulate the economy might even give rise to the opposite effect," he said in a statement today.
"This is because lower and middle income households tend to spend a larger percentage of their income on consumable goods, of which prices unfortunately would have increased as a result," he said.
Wong said policy makers should examine the underlying economic issues such as how to reduce the cost of doing business by reducing red tape, increasing efficiency and promoting productivity - which can ensure Malaysia remains competitive globally for our exports and as an investment destination.
He said this would improve the real purchasing power of the country's lower middle income group workers as well as to increase the income of all strata in society.
"Otherwise, a wage increase will only result in another round of inflation where minimum wage earners lose their jobs while their cost of living still increases," he added.
Yesterday, Human Resources Minister Datuk Seri Saravanan Murugan said a new minimum wage of "around RM1,500 a month" is expected to be implemented before the end of this year.
He said the new rate had yet to be finalised, as the ministry was awaiting Cabinet approval.
In February 2020, Malaysia's minimum wage was raised to the current RM1,200 per month from RM1,100 per month previously.
