Subsidise employers, train workers in proposed Progressive Wages Model, urge MEF

17 Aug 2023 05:55pm
Progressive Wages Model (PWM) presents a model that can potentially close wage gap within workers if implemented well. – FILE PIX
Progressive Wages Model (PWM) presents a model that can potentially close wage gap within workers if implemented well. – FILE PIX
SHAH ALAM – Malaysian Employers Federation (MEF) has suggested to Putrajaya to subsidise employers who take part in the newly proposed Progressive Wages Model, a move to address wage disparaties between workers.

Its president Datuk Dr Syed Hussain Syed Husman further said it should be made voluntary as not to "scare away investors" who are new to Malaysia's businesses.

He said subsidising employers through a percentage-based subsidy on annual salary increments over a specific period would encourage more bosses to do so.

However, he said the government could enhance worker's productivity with government-funded certified upskilling to qualify for higher pay grades.

"Upskilling and reskilling are critical as we are now in the artificial intelligence (AI) and IR4.0 era," he told Sinar Daily.

"Under the Progressive Wage Model, employees should be encouraged to continually pursue certified upskilling and reskilling to align their skills with the dynamic needs of employers as industries evolve," Syed Hussain added.

This comes as more jobs may be under threat with companies shifting to artificial intelligence to increase productivity.

Syed Hussain also acknowledged that while closing wage gaps in specific industries is valuable, prevailing economic uncertainties restrict many employers from immediate implementation.

"In light of the current global economic landscape's uncertainties, enforcing wage increases that amplify business costs is unwarranted," Syed Hussain added.
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He said the proposed model is not only about adjusting wages to commensurate with work productivity, skills and experience but also ensuring employers improve productivity and profits while consumers get better products and services at affordable prices.

"As employees acquire certified skills, gain more experience, and show improved job performance, they will be eligible for higher wages," he added.

He further proposed a prerequisite increased productivity before wage hikes. This approach, he said ensures that productivity growth surpasses wage increments, fostering a favourable environment for both employees and employers.

Citing a study spanning 2011–2019, Syed Hussain said that wage growth consistently outpaced productivity, leading to competitiveness erosion among employers and the nation.

"We cannot implement policies based on one-sided issues or one size fits all," he said on paying higher salaries.

"Employers will normally grant salary adjustments each year based on their affordability. Now that we have raised minimum wage to RM1500, SME owners are finding it hard to comply.

"Another increase is not possible as it will suffocate businesses and inflict natural death. We must be real and understand the holistic economic environment," he said.

He does not deny that closing the gap in wages between the lowest pay and the median pay in selected industries will improve the levels of pay for those in the lowest wage range.

However, he said that the majority of employers are still trying hard to rebuild their businesses as the world economy is currently not that encouraging and is still full of uncertainties.

"The current national and global economic outlook, with its uncertainties, does not warrant any wage increases that will add on to the cost of doing business," he said.

He also said that paying higher salaries would not solve wage gap but cause higher cost of living.

"Without confronting the problem of current high cost of living, the problems of having low salary beforehand and high cost of living will always be in tandem, he added.

Due to that, he said the government needs to put in place policies that effectively curb increases in the cost of living and not resort to putting pressure on private sector employers to keep on increasing wages," he said.

He stated that Micro, small, and Medium Enterprises (MSMEs) make up about 98% of all registered businesses in Malaysia.

"The failure rate of MSMEs in Malaysia is of concern; about 60% of the new MSMEs fail within five years of starting business. Only about 40% of MSMEs are able to successfully meet the challenges of remaining sustainable.

"Pressuring MSMEs to increase wages will put a lot of financial strain on such MSMEs," Dr Syed said.

Due to that, he said upskilling skills would be able to bridge the gap between wages.

He said government's plan to transform Malaysia into one of the top 30 largest economies in the world is doable but a lot of adjustments are needed.

To achieve the top 30 largest economies of the world, he said the country's gross domestic product (GDP) increase needs to hit 2.1 per cent every year over the next ten years, which was well within reach provided that there are no external shocks like the recent Covid-19 Pandemic.

"Malaysia's GDP increase after Covid-19 had shown remarkable increase, with 5.6 per cent in 2022 and

2023 projected at 4 per cent to 5 per cent. The GDP growth rate in 2022 was the fastest annual GDP growth rate since 2000," he said.

"Increasing Malaysia’s GDP to be within the top 30 largest in the world will strengthen the economy, as it is interpreted as a sign that the economy is doing well.

"Generally, when GDP is growing strongly, employment is likely to increase, employers will employ more workers for their operations, and employees will have more income," he added.