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Malaysian employers will face higher wage pressures next year as living costs rise but employers warned a rise in the minimum wage level could instead lead to displacement unless economic growth picks up.
“Employees will likely make the case for higher wage increments and employers will need to take note of the higher cost of living,” said Dr Yeah Kim Leng, dean of business at Malaysian Science and Technology University.
Malaysia’s wage growth has been “one of the slowest” in Asia and has lagged behind increasing consumer prices, the economist said.
The wage trend in Malaysia recorded only an annual 2.6% growth during the past decade with almost 34% of about 1.3 million workers earning less than RM700 a month, which is below the poverty line of RM720 per month.
At the moment, due to the weak jobs market and an influx of cheap foreign labour in certain sectors, wage pressure has been contained but the rollback of subsidies, the introduction of the consumption-based Goods and Services Tax (GST) have led to higher prices of everything from houses to basic goods.
The prices of cigarettes sold in Malaysia increased by almost 40% on Nov 3, just weeks after toll prices for twelve major highways surged drastically.
The implementation of the GST and the removal of petrol subsidies also helped drag down consumer sentiment to its lowest level in the third-quarter of 2015, according to data compiled by Nielsen.
The Consumer Price Index (CPI) in September rose to 2.6% from a year earlier due to higher prices of consumer goods post GST. The CPI is expected to remain at about 2.6% in October.
Bank Negara Malaysia expects inflationary pressure to taper off to historical levels in the early part of next year.
Malaysians “must stop poking too much” on the increasing prices of consumer items, Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar said yesterday.
The government tracks prices across 30,000 consumer outlets on a “weekly and monthly basis”, said Wahid, responding to questions from The Malaysian Reserve on the sidelines of the Malaysia Statistics Conference 2015 yesterday.
“I think you need to put (the higher cost of consumer goods) in a broader context,” Abdul Wahid said.
“(We need to) also look at how growth in income levels can move faster than the rate of increasing consumer prices,” the minister said.
Prime Minister Datuk Seri Mohd Najib Razak, in announcing Budget 2016 on Oct 23, said minimum wages would increase for private sector workers in the peninsula from RM900 to RM1,000 and from RM800 to RM920 for those in Sabah, Sarawak and Labuan from Oct 27.
This move will only result in weakened hiring activity, said Malaysian Employers Federation ED Datuk Shamsuddin Bardan.
“If the government makes us increase wages, we have no choice but to increase them. But this will result in more costs for local businesses and employers will have fewer choices but to consider retrenchment as a cost-cutting measure,” Shamsuddin said in a Nov 1 interview.
The slowdown in the economy has resulted in poorer sales at the nation’s once vibrant manufacturing sector, causing jobs pressure for most of Malaysia’s employers, said Shamsuddin.
The external economy provides little respite. New orders declined at the sharpest rate in over three years in October, underpinned by a contraction in new orders, according to the Nikkei Purchasing Managers’ Index (PMI) for Malaysia.
Purchasing prices rose at the second-sharpest rate in the series to date, as Malaysia’s PMI fell further to 48.1 from 48.3 in September. A figure below 50 indicates a contraction.
Economic growth is “moderating” in line with slowing economic expansion in China, the world’s second-biggest consumer, Abdul Wahid said yesterday.
Malaysia remains “exposed to the risk of global uncertainty” surrounding a potential increase in US interest rates at the end of this year, he said.
Source: The Malaysian Reserve
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