EMPLOYERS have poured cold water on Economy Minister Rafizi Ramli’s proposed progressive wage model, saying the mechanics of implementing the framework could become “very complicated”.

They also said the model would not solve its intended objective – to address the high cost of living by making annual salary increments mandatory.

They said if implemented, it could push their product costs up, which in turn will fuel inflation.

The government has its priorities in the wrong places, SME Association of Malaysia president Ding Hong Sing told The Malaysian Insight.

He said the government, as a matter of urgency, should instead assist the SMEs to move towards automation and digitalisation of their work processes.

“Only with increased productivity will employees get a pay rise,” he said.

Rafizi had planned to unveil the progressive wage model, to address long-standing structural defects in the country’s economy, in August.

Anticipating backlash, he had described the wage model as one of the most “unpopular” reforms he would implement as a policymaker.

Ding said if the production processes of the SMEs are not automated and the country’s economy is still sluggish, production costs will certainly go up when companies have to make the mandatory annual salary increments.

He said if the production costs shoot up, then the SMEs that export their products would become less competitive.

“I hope the government will not implement it. It will just backfire.

“It definitely will not address the inflation issues.”

Federation of Vegetable Farmers Associations president Lim Ser Kwee said the progressive wage model seemed to show the government was only concerned with the welfare of employees and not employers as well.

He said unlike employers in other economic sectors, those in vegetable farming face much more uncertainties and they do not need to fork out more money in mandatory annual salary increments to make life anymore miserable than it already is.

“We farmers are in a business that is at the mercy on the vagaries of the weather. We also can’t estimate how much we can produce in a day.

“We’ve only recovered from the Covid pandemic not too long ago. The economy has yet to fully recover from the pandemic shutdown.

“This wage proposal will only add to our burden and many of us farmers face possible closure if we can’t afford the mandatory pay hike,” Lim said.

The government, Lim said, should not make hasty decisions and would be wise if they have a consultation with the industry first.

“The government should consider whether the industry can afford it.”

Malaysia not yet ready

Lim Hock Eam, a professor of economics at Universiti Utara Malaysia, said Rafizi’s progressive wage model is good in principle but is very complicated to implement.

He said it was a fairly new model that requires the cooperation of the government, the businesses and trade unions representing employees to make it work.

“All three parties are indispensable and this model is unlike the minimum wage system. It is also more costly to carry out because it involves different companies, different sectors and different models.”

Lim said Rafizi’s model seemed to favour workers in less skilled jobs, such as cleaners.

“Employees have to be trained before they are entitled to a progressive salary. And who is going to bear that cost of training the employees?”

He added that the system must also cover imported workers, otherwise employers will switch to imported workers and avoid hiring locals.

Lim bluntly said Malaysia is not yet ready for the progressive wage model.

He suggested the government learn from Singapore on how to effectively implement the progressive wage system in order to be prepared.

“Although there are good intentions with the system, I do not think the government can implement it next year. It will be a disaster for the market if it does.

“After all, when the minimum salary system was introduced, the country also took more than eight years to prepare.”

Meanwhile, Malaysian Employers Federation president Syed Hussain Syed Husman, in a statement, said the Human Resources Ministry, not the Economy Ministry, should handle decisions on wage systems.

“The progressive salary system is supposed to be handled by the Human Resources Ministry, and the economy minister is the one who should share with the business community and the people the plans to boost the country’s economy and improve living standards.

“Unfortunately, we have not seen any concrete plans from the economy minister to improve the economy so far.”

On July 11, Rafizi said it was unlikely the government would be able to address the issue of rising cost of living before implementing the salary system. – July 23, 2023.