RM2,000 minimum wage must ensure businesses remain viable

KUCHING: The planned increase in the minimum wage from RM1,700 to RM2,000 a month must translate into better living standards for workers without placing excessive financial pressure on small businesses, says Universiti Malaysia Sarawak (UNIMAS) academic, Dr Nur Auni Ugong.

The Deputy Dean (Student Affairs and Alumni) at the Faculty of Social Sciences and Humanities said the additional RM300 would have limited benefits if rising prices of food, housing, transportation and essential goods continued to erode workers’ purchasing power.

“The main question is whether the increase can genuinely improve people’s living standards, particularly when the prices of food, house rentals, transportation and essential goods continue to rise,” she said when contacted on Friday (Oct. 9).

She said the policy should be accompanied by measures to ease the cost of living, including better public transportation, affordable housing, improved healthcare services and reasonable prices for essential goods.

At the same time, the financial capacity of micro, small and medium enterprises (MSMEs) must be considered, as eateries, grocery shops, workshops, local food businesses and family-run enterprises provide employment for many people.

Nur Auni illustrated the impact with an eatery employing five workers at the current minimum wage of RM1,700.

Raising their basic salaries to RM2,000 would increase the employer’s wage bill by RM1,500 a month or RM18,000 annually, excluding additional employer contributions and related costs.

While larger businesses may be better positioned to absorb the increase, she said small enterprises operating on narrow profit margins could face considerable pressure.

“If the higher costs cannot be offset by increased sales or improved operational efficiency, some employers may reduce the recruitment of new workers, limit overtime, raise the prices of goods and services, or restructure their business operations,” she said.

However, she stressed that the impact would vary depending on the nature of each business, its customer base and profitability. The interests of workers must therefore be balanced with business sustainability.

To help MSMEs cope with higher wage costs, she called for government assistance to focus on improving productivity through appropriate technology, management training, financing facilities and wider market access.

Nur Auni also highlighted the need to account for differences between urban and rural areas, particularly in Sarawak, where transportation costs, employment opportunities, business conditions and access to markets vary significantly.

In some rural communities, goods are more expensive because of transportation costs and long travel distances, while limited employment opportunities and smaller customer bases make it harder for businesses to sustain their operations.

“Although the minimum wage is set at a uniform rate, the actual benefits to workers may vary depending on where they live and their family circumstances,” she said.

She said improvements in basic infrastructure, including roads, internet connectivity, education and healthcare, were essential to ensure workers and businesses in rural areas could benefit more equitably from economic development.

Greater business opportunities and stronger social protection were also needed for the self-employed, gig economy workers and small-scale traders, who faced similar cost-of-living pressures.

Nur Auni said the success of the minimum wage increase should not be measured solely by the additional RM300 received by workers, but also by their ability to meet basic needs, retain employment and support their families.

Equally important was ensuring that businesses remained viable and continued creating jobs.

“The economy is not just about growth figures, business profits or income levels. It is also about the lives of workers supporting their families, including parents thinking about their children’s education, young people building their futures and small traders striving to keep their businesses going,” she said.