LLRC: Businesses that cannot even pay minimum wage should close shop

KUCHING (Oct 23): The Labour Law Reform Coalition (LLRC) Sarawak has criticised the SME Association of Malaysia for engaging in fear-mongering over the upcoming increase in minimum wage from RM1,500 to RM1,700, which is set to be fully implemented by August next year.

LLRC Deputy President Andrew Lo expressed disappointment that the SME Association has reverted to its previous rhetoric about widespread business closures resulting from the minimum wage hike.

He labeled the association as “a bunch of cry babies,” stating: “Businesses that cannot pay a minimum wage above the poverty line should not be in operation.

“They should close shop.”

His statement followed comments from Malaysian SME Association President Chin Chee Seong, who claimed that the wage increase and proposed Employees Provident Fund (EPF) contributions would burden small and medium-sized enterprises (SMEs).

Chin argued that SMEs are unable to absorb these additional costs or pass them on to customers, unlike larger businesses.

“Raising prices would risk alienating customers, resulting in lower revenue and shrinking profit margins, thus threatening business viability,” he said.

In response, Lo said: “If the warning is true that it may lead to some businesses folding, such restructuring of the low wage model is most welcome to push us to a high income nation.

“Businesses that cannot even pay a minimum wage that is below the poverty line index have no business to be in business. They should close shop,” he reiterated.

Lo further argued that the government should not subsidise inefficient businesses by keeping salaries low, to the extent that the Malaysian government has to spend billions to subsidise anything from petrol to chickens.

On the other hand, he noted that SMEs are among the most protected and assisted business communities, benefiting from numerous initiatives.

“We challenge the SMEs to provide a full tax account to show that the sharp rise in operational costs could push struggling SMEs into insolvency, leading to widespread business closures and job losses,” said Lo.

“If it is indeed true, we will petition the government to reduce the minimum wage.

“We wish to point out that employers in the past even made the debunked claim that minimum wage will cause 300,000 businesses to close. It’s a blatant misrepresentation.

“It is also misconceived to blame the increase in prices of goods on minimum wage. Prices have been increasing even when the minimum wage has not increased since May 1 2022. In actual fact, it is such an increase in prices that puts the pressure to increase minimum wage.

“Otherwise, workers will fall into abject poverty, and the government has to put them on welfare,” he said.

Considering factors such as the poverty line index, median wage, labor productivity growth, inflation, and full employment amid employers’ requests for foreign workers, Lo believes the minimum wage should be set at a minimum of RM2,000.

“The wages to income ratio (of the lower income group) is at just 32 per cent, much less than their competitive peers of between 45 per cent to 55 per cent,” he said.