THE SME sector has urged the government to establish a high-level task force to address severe disruptions to the job market and plan for the future. 

Small and Medium Enterprises Association Malaysia (Samenta) president William Ng said the task force must be peopled by  government agencies and industry to resolves issues of wages and employment.

“We need to not only solve the issue of job market disruption leading to underemployment of Malaysians and stagnant wages, but map out the availability of a trained workforce to support the growth of our industries,” he said in a statement.

Ng urged the government to provide high-value jobs for Malaysians and help businesses, especially small-and medium-sized enterprises (SMEs), to upgrade their workforce and digital capabilities.

He said the current piecemeal and reactive approach is dangerous and regressive, resulting in increasing disconnect between policymakers and industry in such areas as minimum wages, labour laws, social security coverage and employee benefits.

On August 9, employers had rejected Economy Minister Mohd Rafizi Ramli’s proposed progressive wage model (PWM), saying its implementation could become “very complicated”.

They said the model would not address the high cost of living by making annual salary increments mandatory.

They said if implemented, it could push their product costs up, will fuelling inflation.

Rafizi said the PWM was designed to increase the wages of different rungs of workers, by mandating salary increment at various tiers, based on an employee’s achievements in terms of skills and productivity. 

He said this would cover the shortfalls of the minimum wage system, which largely supports the lowest-paid workers. 

Ng today said Samenta was not consulted on the issues even though it is Malaysia’s oldest and largest SME association.

“The costs go far beyond the incremental salaries, but include the training, administrative and compliance costs, which would fundamentally alter the cost structure of many SMEs – leading to potentially disastrous consequences,” he said.

“As such, for PWM to work, the government should be prepared to subsidise up to 75% of the wage differential, as is practised in Singapore, while paying for the training to upskill employees to move up to the next tiers.”

Ng said that efforts to increase salaries must be tied to growth in labour productivity. 

“That was the basis of the minimum wage model that we are practising. The minimum wage has gone from RM900 (peninsula) in 2013 to RM1,500 in 2023 – a 67% increment, while our labour productivity has improved by a mere 25% over that same period, and even that was driven largely by our export bonanza over the past decade. 

“As a result of this disconnect between the rise in minimum wage and productivity, many SMEs have sunk further into the low income, low value-add trap – resulting in dismal profit margins that account for the majority of business failures during the recent pandemic.

“The problem is structural in nature. Many SMEs exist to service larger firms, who happily outsource their more labour-intensive work, such as cleaning, packing and transport to SMEs. 

“As a result, the labour productivity of SMEs is 30% lower than that of larger firms. The PWM will impact the SMEs more than larger firms. 

“The PWM will not solve the problem of SMEs being stuck in the low-income, low value-add trap, and if not carefully implemented, will exacerbate the situation and lead to the demise of even more SMEs.” – August 9, 2023.