Minimum wage necessary, says economist

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PETALING JAYA: There will always be side effects from any minimum wage policy, but it is nonetheless a necessary policy, says veteran economist Yeah Kim Leng.

Speaking to FMT on former newsman A Kadir Jasin’s criticism of the minimum wage policy, Yeah said challenges arising from the policy tend to affect industries or businesses with low profit margins or large low-wage costs.

On Sunday, Kadir had criticised the policy, citing news reports that a majority of childcare centres were set to close shop as the minimum wage policy had put a strain on operational costs.

The economics professor at Sunway University Business School said this was unavoidable as it affected industries which have small profit margins and employ employees who do not earn the minimum wage.

“Even if childcare workers are not paid the minimum wage, sooner or later childcare centres will face a shortage of employees as these employees will leave to earn higher wages in other industries.”

He said the solution was for childcare businesses to adapt by changing their bisiness model.

Yeah said that these businesses will have to find ways to increase productivity and reduce overheads, either by merging, sharing facilities or increasing fees.

“What is needed is a bit of give and take between centres and parents.

“Some businesses will suffer, but ultimately the minimum wage policy will benefit the low-wage earners and nudge businesses to increase productivity and create better-paying jobs.”

The minimum wage has been one of the policies pushed through by Prime Minister Najib Razak and involves all employees in the private sector, regardless of the number of employees they have, except domestic helpers (maids).

The minimum wage is set at RM1,000 per month or RM4.81 per hour for the peninsula, and RM920 per month or RM4.42 per hour for Sabah, Sarawak and Labuan.

Earlier in a blog post, Kadir, a former group editor-in-chief of New Straits Times Press Berhad, said Najib’s policies had caused untold damage to the economy and misery to the people.

He cited the minimum wage policy, which he said was implemented despite many employers lacking the ability to pay these wages.

For this alone, Kadir said, Najib was unfit to continue as prime minister.