'Excessive minimum wage increase could lead to cost shock for businesses' - ACCCIM

KUALA LUMPUR: The Associated Chinese Chambers of Commerce and Industry of Malaysia (Acccim) has cautioned that an excessive minimum wage adjustment could create a cost shock for businesses, particularly those operating on thin profit margins.

Its president, Datuk Ng Yih Pyng, said businesses had already been inundated with multiple cost increases over the past two years amid a challenging operating environment.

While not against an increase in the minimum wage, he cautioned that an overly large adjustment could impact micro, small and medium enterprises (MSMEs).

Ng said the level should strike a balance between improving workers' incomes and ensuring the operational survival of MSMEs.

He noted that businesses with thin margins could pass higher labour costs on to consumers through higher retail prices, adding to inflationary pressures.

He said sectors with a large presence of low-wage and entry-level workers, including retail, restaurants, food services, agriculture and small and medium-sized manufacturing, would be particularly exposed to higher operating costs.

Ng also highlighted the "ripple effect" of a minimum wage increase, whereby workers earning slightly above the minimum threshold could also seek higher wages.

He said this could increase overall payroll costs as businesses adjusted wages across different levels to maintain existing wage differentials.

At the same time, higher minimum wages would directly increase employers' statutory contributions to the Employees Provident Fund, Social Security Organisation and Employment Insurance System.

Ng said a one-size-fits-all approach to minimum wage increases could put smaller businesses at risk of having to reduce their workforce or shut down.

Instead, wage increases should take into account productivity and performance, sector-specific financial capacity, as well as broader economic and business conditions, he said.

Acccim, he said, called on the government to consider a tiered regional system rather than a uniform national rate, taking into account differences in the cost of living, labour market conditions and levels of economic development across states.

He said a single wage floor could place disproportionate pressure on businesses in economically weaker regions, while workers in high-cost areas might still struggle to meet basic living expenses.

Under a tiered approach, minimum wages could be calibrated to local conditions, allowing higher wages in high-cost cities while helping low-margin businesses in weaker markets manage labour costs and reduce the risk of job losses.