Malaysia’s government move to increase the minimum wage to RM1,700 starting next February has raised concerns among small and medium enterprises (SMEs), with industry experts describing the move as a double-edged sword. In unveiling Budget 2025, Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim said the wage hike was necessary to help Malaysians cope with rising living costs, utilities, and global economic pressures. Employers with fewer than five employees will have until August 1, 2025, to comply with the new wage floor.
SME advisor Yeoh Seng Hooi acknowledged the potential benefits of the hike but warned that it could strain businesses already facing challenges. “If you’re already struggling, any additional cost will worsen the situation. But, on the other hand, more disposable income could boost sales, making this a double-edged sword,” he told Malay Mail.
The Small and Medium Enterprises Association of Malaysia (Samenta) echoed these concerns. Its president, Datuk William Ng (pic), cautioned that the wage hike could lead to significant job losses, particularly in Sabah and Sarawak, where businesses operate on razor-thin margins.
“In urban centres like the Klang Valley, southern Johor, and Penang, median wages are already higher than RM1,700. Beyond job losses, we could see wage compression among the M40, with foreign workers being the biggest beneficiaries of the revised minimum wage,” Ng said.
He urged the government to allow lesser-developed states to maintain the current wage levels or remove the minimum wage requirement altogether. Ng also noted that automation is not a feasible solution for many SMEs. “Automation isn’t an automatic solution for SMEs dealing with severe margin compression, which will worsen with the minimum wage hike. Many multinational enterprises (MNEs) outsource labour-intensive tasks like cleaning, maintenance, and logistics to SMEs,” he said.
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