BUDGET 2027 certainly contained measures that were earmarked for the rakyat.
Apart from higher tax relief and the lowered taxes, the tax-paying public also got the widely expected increase in the minimum wage.
But wait. The minimum wage increase cannot be celebrated yet. There were caveats placed on it that can be quite detrimental to the poorest of the wage earning public.
First off, there was the decision to exclude micro, small and medium enterprises (MSMEs), to prevent a sudden cost increase that can affect their bottomline.
The argument is that cost increases are already prevalent in the business ecosystem and a wage hike will put further strain on their business.
Such companies, with annual sales of less than RM50mil a year, are exempted from raising minimum wages in June next year when the new wage level kicks in for the rest of the companies.
MSMEs employ about 48% of workers in Malaysia and the entire private sector workforce totals around 15.6 million people.
The interesting approach to minimum wages is how such wages are now tiered in the country, with semi-skilled and new graduate workers set to enjoy a minimum wage of RM2,500 a month.
Employees of government-linked companies (GLCs) will also see their salaries rise from a minimum of RM3,100 to RM3,400 a month.
The more novel tiered system has its benefits but also its faults.
While the new minimum wage for the time being will not see costs rise for small businesses, it will be unfair on employees of such businesses who will be deprived from earning a slightly higher salary from the current RM1,700 a month.
The increase isn’t much but it will mean the world to employees who don’t earn much.
The irony is that foreign unskilled employees who work for larger companies will enjoy a higher salary, putting Malaysian workers at a disadvantage.
The exclusion of employees of MSMEs who don’t qualify for the wage increase will create a tiered system in the employment market.
Workers of MSMEs will tend to gravitate to higher paying jobs, creating a vacuum among the small companies.
With unemployment rate at 2.9%, an indication of a tight labour market, filling such jobs can prove to be challenging and the Government’s last resort could be to allow MSMEs to hire foreign labour to fill the gaps in employment needs.
That will prove to be counterproductive for Malaysia.
The wage discrepancy will encourage job hopping among employees of small companies.
With incentives to upskill, that can prompt many Malaysians to pursue skills training and other upgrades that can see them gravitate towards better paying opportunities being offered by larger companies.
A loss of workers in a highly less automated operation will mean a loss of productivity and competitiveness.
That will eventually translate to a loss of profit, putting more stress on a business that is already dealing with pressures from multiple angles.
For companies that do have revenue of more than RM50mil a year, such as plantation companies, the increase in labour costs can be seen as a pull factor for labour.
There is no doubt their wage bill will rise but that can also address the hurdle of finding workers.
For companies that need to offer a minimum of RM2,500 for semi-skilled and graduate employees, the additional cost increase will be judged against the productivity of their employees and the competitiveness of the businesses.
It can serve as an impetus to automate to get productivity up instead of relying on the low cost of wages, as the companies may have done in the past.
The higher salaries can also address the underemployment issue where graduate employees are forced to accept low-ball offers from companies just to get a job.
The higher wages being offered by GLCs should also reward graduates or skilled labour with their market’s worth.
By setting the benchmark higher, GLCs will offer competition to other large private companies in sourcing talent.
Employees too will find just reward commensurate with the abilities they have.
All these measures are part of the effort to raise wage share to gross domestic product to 40% by the year 2030 under the 13th Malaysia Plan.
Previous efforts, however, have always fallen short.
As workers have employment opportunities and also higher salaries, they can afford to make purchases such as homes and vehicles, save for a better future and participate in the growth of their careers and future.
Higher salaries are not a bane to companies and the economy. First world countries do offer higher salaries and do extract better productivity as salaries and the use of automation rises.