Social activist cautions possible drawbacks from minimum wage rise outlined under Budget 2025

2 months ago 25
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Voon Shiak Ni

KUCHING (Oct 21): The government should have looked into the potential benefits and also the drawbacks before deciding to raise the country’s minimum wage to RM1,700, effective from Feb 1 next year.

In pointing this out, social activist Voon Shiak Ni also highlights the caution that the increase in the minimum wage rate could lead to higher prices of goods and services, eroding the supposed gains from the increased wages.

“The federal government must reveal what and how it may and will implement the necessary and complementary policies to curb price hikes and mitigate this risk,” she said in a statement yesterday, in commenting on the Budget 2025 tabled in Parliament last Friday.

Voon said the very purpose behind the move to raise the minimum wage would be defeated if the people had to cope with price hike of goods and services due to an increase in labour costs.

She added that the small and medium enterprises (SMEs) and companies would also be affected.

In this regard, she said the government had to be mindful of the significance of the SMEs and companies in the Malaysian economy, as well as the support for the huge proportion of workforce and their families.

“The SMEs and companies are sensitive to the effects of rise in costs of their operations and production – a disproportionate rise in labour costs would inevitably trigger job cuts and increase in the prices of goods and services.”

In mitigating price hikes, Voon suggested that the government might consider the implementation of targeted subsidies for essential goods and services.

She said this should involve providing financial assistance to consumers or producers to offset the costs of specific items such as food, transportation or utilities.

“While subsidies can be expensive, they can be a valuable tool for protecting the vulnerable population from the adverse effects of inflation.

“However, it is also crucial to design subsidy programmes carefully to avoid unintended consequences such as dependency and inefficiency.”

Voon further proposed for the government to promote sustainable agriculture and food production to ensure a stable supply of essential goods.

She pointed out that investing in agricultural research and development, improving infrastructure and supporting small-scale farmers could help offset the vulnerability of the food system to shocks such as droughts or pests.

She believed that the government could help prevent excessive price increases by ensuring a steady supply of food.

“In addition to these measures, it is essential to strengthen consumer protection mechanism. This includes educating consumers about their rights, providing avenues for complaints and enforcing consumer laws.

“By empowering the consumers, the government can encourage businesses to adopt fair pricing practices and improve product quality.”

Voon also stressed that the success of any policy aimed at balancing minimum wage increases with price controls, would depend on careful implementation and coordination.

As such, she said the government must engage with the stakeholders including businesses, labour unions and consumer groups to develop effective solutions that would address the specific needs of and challenges in the Malaysian economy.

“By adopting a comprehensive approach that combines market-based reforms, targeted subsidies and consumer protection measures, the government can ensure that the benefits of a higher minimum wage are realised, while mitigating the negative consequences of inflation,” added Voon.

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