Tengku Zafrul: Rise in minimum wage crucial to compete with other economies in the long term

KUALA LUMPUR – Raising the minimum wage appropriately is crucial for the country to compete with other developing economies, said Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz.

Tengku Zafrul explained that the country would eventually need to move away from depending on low skilled labour and more into the technology sector or new industries of the future.

“We want our industries to move to a higher level or else it will continue to rely on low skilled labour and we will not be moving into the technology space because as a country, we want to move up the value chain.

“We want to move away from low skilled labour so that our labour force can reskill and upskill for the jobs and industries of the future.

“We also need to increase the minimum wage...we have to do it. It is not a popular view and a lot of the business people, many of who are friends of mine, will not agree but I think we have to give them a timeline.

“Some of them do not even realise that other countries are going to overtake them because they are investing (in other sectors) and then they realise even with low skilled labour, you can’t compete and it would be too late,’’ he said in an exclusive interview with Sinar Daily last Friday (Jan 21)

Earlier in the interview, Tengku Zafrul mentioned that Malaysia’s small-medium enterprise employs roughly 60 per cent of the workforce however only contributes some 40 per cent to the nation’s gross domestic product (GDP).

The low productivity is also attributed to over-reliance on low skilled labour, said Tengku Zafrul.

Tengku Zafrul also commented that low wages also contribute to higher government spending to support social aid however pointed out that this perpetuates "a vicious cycle" as government funds are mainly taxes collected from the people.

"The government have to bear the social safety net, for example, there are cases of M40 households falling below the income line and becoming B40, it is because of the wages. So then who has to come in (to help)?...the government, that's who.

"But where is the government's money coming from, the people. So it is a vicious cycle. We need this money for development that is why we need to make this unpopular decision with the companies but in the long term, we need to look back at the policies,'' he said.

However, Tengu Zafrul explained that the government should provide a proper timeline and even incentives in raising the minimum wage to allow businesses to adjust accordingly and that there would be no negative impact on the economy.

In February of 2020, Malaysia’s minimum wage was raised to RM1,200, for 56 major towns and cities, including Kuala Lumpur.

Putrajaya had also stipulated in the 12th Malaysia Plan to increase average household income to RM10,000 per month by 2025.