The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) has cautioned against a substantial increase in Malaysia’s minimum wage from the current RM1,700 per month.
The chamber said a steep adjustment could place additional financial pressure on micro, small and medium-sized enterprises (MSMEs), which have already faced multiple cost increases over the past two years amid a challenging business environment and rising competition from foreign businesses.
ACCCIM said it is not opposed to an increase in the minimum wage. However, it cautioned that an overly large adjustment could create a cost shock for businesses operating on thin profit margins.
According to ACCCIM, businesses facing higher labour costs may pass some of those increases on to consumers through higher retail prices, potentially contributing to cost-push inflation.
Labour-Intensive Sectors Could Face Higher Costs
ACCCIM said industries with a large proportion of low-wage and entry-level workers could be particularly affected by a significant minimum wage increase.
These include retail, restaurants, food services, agriculture and small and medium-sized manufacturing, where higher labour costs could translate into increased operating expenses.
The chamber also highlighted the potential ripple effect on workers earning wages slightly above the minimum wage. When the minimum wage rises, businesses may also face pressure to adjust wages for employees whose pay is already above the new wage floor.
In addition, higher wages would directly increase employers’ statutory contributions, including contributions to the Employees Provident Fund (EPF), Social Security Organisation (SOCSO) and Employment Insurance System (EIS).
ACCCIM Proposes RM1,900 Minimum Wage
ACCCIM president Datuk Ng Yih Pyng said an appropriate minimum wage level would be RM1,900 per month, representing an 11.8% increase from the current RM1,700.
Ng said minimum wage increases should balance improvements in workers’ incomes with the operational survival of MSMEs.
ACCCIM argued that a one-size-fits-all approach to minimum wage increases could place disproportionate pressure on smaller businesses, potentially leading some to reduce their workforce or close down.
Instead, the chamber said future wage increases should take into account productivity and performance, sector-specific financial capacity, as well as broader economic and business conditions.
The proposed RM1,900 figure and ACCCIM’s concerns come as the Government reviews the next minimum wage adjustment. On 30 September, the Cabinet agreed that MSMEs would be temporarily exempted from the new minimum wage increase, with the Government also considering wage subsidies under the Progressive Wage Policy as an alternative way to support wage growth.
Regional Minimum Wage System Suggested
ACCCIM also called on the Government to explore a tiered regional minimum wage system rather than applying a uniform national rate.
The chamber said Malaysia’s states and regions differ in terms of cost of living, socio-economic conditions, labour market conditions, and levels of economic and business development.
According to ACCCIM, these differences can create different pressures for both employers and workers. Businesses in lower-wage states, for example, could face difficulties absorbing higher labour costs, while workers in higher-cost areas may find that a uniform minimum wage does not adequately cover basic living expenses.
A tiered approach could calibrate minimum wages according to regional cost-of-living differences, allowing higher wages in areas with higher living costs while reducing the risk of sudden labour cost increases for businesses in economically weaker regions.
Balancing Workers’ Incomes and Business Sustainability
ACCCIM said a regional approach could better reflect local economic conditions while supporting workers’ livelihoods and protecting businesses from unsustainable labour cost increases.
The chamber has previously advocated for regional minimum wage considerations, citing differences in cost of living, economic development and labour market conditions across Malaysia.
As Malaysia considers the next stage of minimum wage policy, ACCCIM’s proposal centres on a gradual adjustment that takes into account productivity, business capacity and regional differences rather than applying the same wage increase uniformly across all businesses and locations.
