SHAH ALAM - Raising the minimum wage to RM2,000 is a realistic and reasonable step amid rising living costs and the need to ensure workers’ incomes keep pace with current economic conditions, says UniKL Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid.
He said the increase was reasonable when viewed against the Decent Living Expenditure (PAKW) figures, particularly for workers in Kuala Lumpur.
He said a single person in Kuala Lumpur needs around RM2,700 to live comfortably, while a family requires around RM4,700, making the current RM1,700 minimum wage increasingly inadequate.
Although RM2,000 would still be below the PAKW level, Aimi said the increase could help narrow the income gap and reduce the need for workers to take on two or three jobs.
“Workers earning below RM3,000 tend to spend a large portion of their income at grocery shops, night markets and on online services. For every RM1 increase in the minimum wage, 80 sen goes back into the local economy. This is what actually helps businesses.
“Higher minimum wages could also reduce dependence on foreign workers. When wages are only RM1,700, young Malaysians are reluctant to take up dirty, dangerous and difficult (3D) jobs.
“If wages increase to RM2,000, combined with overtime (OT), they may become more willing to take up such jobs, with their income becoming comparable to that of p-hailing riders.
“The move would also push companies to improve productivity. Countries such as South Korea and Taiwan, where minimum wages have increased gradually, have seen productivity double as organisations adopted automation and provided training for workers,” he told Sinar on Tuesday.
On the downside, Aimi said a uniform minimum wage could widen income disparities between regions.
He said while RM2,000 may still not be enough for workers in Kuala Lumpur, the same amount could have a different impact in areas such as Gua Musang, Bintulu and Kuala Nerang.
Rural businesses could also face greater pressure if the minimum wage was raised to the same level nationwide, he said.
Aimi did not dismiss concerns that the move could further accelerate the already rapid migration of young people from rural areas to Kuala Lumpur.
“Food and services inflation could increase by about 0.4 to 0.6 per cent within six months after implementation.
“People will have more income and spend more. Sectors where labour costs account for more than 35 per cent, such as restaurants, laundries, childcare centres and hair salons, will pass on the additional costs.
“There is also a risk of 30,000 to 50,000 jobs being affected, particularly among young people entering the workforce.
“A study by Bank Negara Malaysia (BNM) in 2023 found that every 10 per cent increase in the minimum wage could reduce formal employment opportunities for low and semi-skilled workers by about two per cent,” he said.