Premier: Mechanism needed to manage cost of living, tame inflation before raising minimum wage

KUCHING (May 19): The federal government needs to find a mechanism that will enable people to cope with the cost of living before raising the minimum wage rate from the current RM1,500 to RM2,102 per month as proposed by the United Nations Children’s Fund (Unicef), said Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg.

While stressing the importance of ensuring a healthy wage growth over a period of time, Abang Johari also said the cost of living issue needs addressed as a whole, as the issues of wages and inflation are not exclusive from one another.

He opined that the implementation would not be smooth sailing if there was no mechanism to tame the impact of the country’s inflation.

“We’re considering it, but there’s no solution yet. Actually, we’ve conducted a study that I’ve directed to the State Secretary because when we raise public service salaries, it means the private sector has to follow suit, but based on their affordability, of course.

“But the important thing is if salaries increase, meaning local consumption rises, it will further boost the economy. But the only threat is inflation. So, we need to control salary increases in line with inflation to prevent sudden price hikes.

“If inflation rises, then there is no benefit to raising salaries, so our economic policy must be balanced,” he said when met at the ‘Malaysia Book of Records: Most Participants in Ethnic Attire in A Choreographed Dance Performance’ event held at Kuching Waterfront today.

Abang Johari said this in response to questions by the media following federal Economy Minister Rafizi Ramli’s recent response to the proposal by Unicef that Malaysia needs to raise its minimum wage rate from RM1,500 to RM2,102 per month.

Elaborating further, Abang Johari said the proposal would need to be carefully studied as there is a linkage between wage and inflation and growth.

These issues need to be deliberated with Bank Negara Malaysia (BNM) so that they remain moderate and do not have an impact on growth, he added.

“And the banks should provide input because inflation essentially means ‘have more money but fewer goods to buy.’ So, if you raise interest rates, money flow in the market decreases, meaning prices will fall whether we like it or not.

“What I mean is there must be a mechanism to control inflation. Because if we raise salaries, we don’t want this to be done just for the sake of it, but in terms of purchasing power, it remains the same. So, there’s no benefit.

“That’s why the federal government, especially Bank Negara Malaysia and the Ministry of Finance, should consider the implications of the percentage increase and its effects on market liquidity,” he said.

Abang Johari said the state is of the view that discussion on wages should include ways to elevate education to produce a highly-skilled workforce, adding that cultivating talents and equipping individuals with skills are necessary to ensure the country continues to progress.

“For Sarawak, we’ve conducted a study, focusing on raising salaries in line with productivity, but what we can do is create highly-skilled jobs.

“That’s why we are advocating farmers to use machinery and technology, meaning their income will increase. If they stop using hoes and start using tractors, the tractor drivers’ salaries, which are higher than a hoe users’, will increase, thus raising their income based on skills,” he added.

Last Wednesday, Rafizi had said the federal government will study Unicef’s proposal on the minimum wage rate discussion on wages, cost of living and inflation needs to be managed carefully.

This came following  Prime Minister Datuk Seri Anwar Ibrahim’s announcement early this month that the  federal civil servants would enjoy a salary hike of more than 13 per cent starting December this year,

Anwar, who is also Finance Minister, said that under the Public Service Remuneration System (SSPA) being revised, the government would ensure that the minimum income for civil servants exceeds RM2,000 per month.