LOW labour productivity must be addressed before a standardised minimum wage can be introduced across the country, said the Malaysian Employers Federation (MEF).

Its executive director, Shamsuddin Bardan, said the new Pakatan Harapan government’s promise to equalise minimum wage nationally within its first 100 days must take into account the burden on businesses, especially in Sabah and Sarawak.

“We have to be realistic with the reasoning behind the differential. 

“Until and unless lower productivity is resolved in Sabah and Sarawak, we may not be able to equalise the rates,” he said. 

PH’s election manifesto pledged to begin the process of increasing the monthly minimum wage in its first 100 days. It pledged to subsequently raise it to RM1,500 in its first five years in power and review the rate biannually.

Currently, the minimum wage in Peninsular Malaysia is RM1,000 and RM920 in East Malaysia. 

Wages in Sabah and Sarawak are lower because of the productivity level and the capacity of employers there to pay more, Shamsuddin added.

“Productivity levels are part of the criteria to determine the minimum wage. (As productivity) is still lower in Sabah and Sarawak, technically, we cannot have the same rate for East and Peninsular Malaysia,” he said. 

Malaysia’s ratio of employee compensation (CE) to gross domestic product (GDP) is still low at 35.3% in 2016, compared with high- and middle-income countries like Australia (47.8%), South Korea (43.2%) and South Africa (45.9%), according to data in the 11th Malaysia Plan.

Shamsuddin said businesses, especially in Sabah and Sarawak, were not ready for equalised minimum pay.

“The minimum wage policy can still be there but based on what is happening, there shouldn’t be any increases in the minimum wage for the time being.”

He said other policies that should be in place before a standardised and higher minimum wage can be implemented are moves to increase the public’s purchasing power, which would drive growth and productivity.

Shamsuddin, however, lauded the move to scrap the goods and services tax (GST) come June 1. 

“That will have a positive impact on the prices of goods and services and will increase productivity. 

“When you increase productivity, companies can actually share the proceeds of increased productivity for things like incentive payment and extra bonuses,” he said. – May 28, 2018.