Mef Mtuc Say State Based Minimum Wage Proposal Problematic

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The Federation of Malaysian Manufacturers recently called for minimum wage adjustments to be premised on a state-based or regional model to reflect local economic realities more effectively.
PETALING JAYA: An employers’ group and a trade union have both dismissed calls for the implementation of a state-based minimum wage, saying the policy would create numerous issues.
Malaysian Employers Federation (MEF) president Syed Hussain Syed Husman said while the proposal by the Federation of Malaysian Manufacturers (FMM) appeared theoretically sound, its execution “would be problematic”.
Syed Hussain said a state-based minimum wage would create an uneven playing field, giving businesses in lower-wage states an unfair advantage over those with a higher baseline.
He said executing the policy would require an in-depth study of regional factors before adjustments are made, increasing the administrative burdens of businesses and authorities.

A non-uniform wage system, he added, would lead to wage disparities, causing worker migration and labour shortages in states with lower minimum wages.
“For example, if employees in Johor earn a salary comparable to Singaporeans, many (from other Malaysian states) will flock to Johor,” he told FMT.
Syed Hussain said MEF favours the government’s approach of a uniform national minimum wage policy according to recommendations made by the National Wages Consultative Council.
“However, there could be periodic adjustments based on economic indicators like inflation, productivity increase, employment rate, poverty line index and the ability of employers to pay.”
On Jan 31, FMM proposed that future minimum wage adjustments consider state-based or regional models to better reflect local economic realities, with its president Soh Thian Lai saying the rate should factor in the need to balance workers’ wages with inflation and consumer price movements.
He said the current one-size-fits-all approach which sees the minimum wage set at RM1,700 could strain businesses, particularly small and medium enterprises (SMEs) in less developed areas.
However, Effendy Abdul Ghani of the Malaysian Trades Union Congress (MTUC) said implementing a state-based minimum wage could lead to wage suppression, with employers in lower-wage states keeping salaries stagnant under the pretext of unaffordability.
“This could widen economic inequality and leave workers in certain states struggling to meet basic needs such as food, transportation and healthcare, which may not be significantly cheaper in rural areas,” he said.
He added that there was the risk of companies relocating to lower-wage states to reduce labour costs, leading to job losses in higher-wage states.
Effendy said a national minimum wage should ensure that all workers receive a dignified income regardless of location. He suggested that the government explore a tiered minimum wage that includes strong protections for workers.
“Beyond minimum wage adjustments, workers should be entitled to a cost-of-living allowance to account for inflation and regional price differences.”
He said such an allowance would ensure that the purchasing power of workers remains stable, especially in high-cost urban areas such as the Klang Valley, Penang and Johor Bahru.
Besides that, employers should also be encouraged to provide additional allowances such as for transportation, housing and meals, particularly in regions where living costs are higher, he said. - FMT

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