Minimum wage hike will backfire on job market, say experts

Shamsuddin: Many employers are not hiring at the moment.
Shamsuddin: Many employers are not hiring at the moment.

PETALING JAYA: In light of concerns repeatedly expressed by youth today, that their salaries aren’t enough to cope with the rising cost of living, some quarters have suggested raising the starting salary for graduates as well as the minimum wage.

Industry and economic experts, however, say this would actually backfire on the job market as some businesses may reduce their workforce to cope with the inevitable increase in their operating costs.

Malaysian Employers’ Federation (MEF) executive director Shamsuddin Bardan said most companies are already “up to their noses” in terms of managing the costs of operating their businesses.

Any further increase, especially one that is mandatory, may prove to be too difficult for them to cope with, he said.

“My main concern is, if the authorities force the issue (increasing starting salaries), the employers may react by reducing the number of their employees just to maintain their costs.

“That will not be good, especially for those seeking to land their first job.

“It is already difficult enough for school leavers and graduates to land their first job, which is understandable because many employers are not hiring at the moment,” Shamsuddin told FMT.

A survey conducted by the Merdeka Center for Opinion Research revealed that nine out of 10 Malaysian youth believe that the average wage is low.

This is in line with the views expressed by youths whom FMT spoke to last month, most of whom said a starting salary of RM3,000 for graduates was the only way they could satisfactorily make ends meet.

‘Employees should be thankful to have a job’

Shamsuddin said he understood the jobseekers’ predicament, especially now when the cost of living is “pretty high”.

But he also expected the jobseekers and those who are already employed to be realistic and understand that times are hard even for employers.

“Employees should be thankful if they still have a job during this period, and should perhaps work to assist the company through these hard times. Most companies will try to manage their operating costs as much as possible.

“But if the employees perform and as a result the company performs better, then these employees would share the profit in the form of bonuses perhaps,” he said.

Yeah says while raising the minimum wage would help the youths, it would negatively affect the private sector.
Yeah says while raising the minimum wage would help the youths, it would negatively affect the private sector.

Sunway University Business School economics professor Yeah Kim Leng agreed. He said while raising the minimum wage would help the youths, it would negatively affect the private sector.

“Artificially raising wages could result in companies downsizing their operations further, as they would face a threat of business failure and financial difficulties.

“The private sector is driven by performance and new hires have to prove their ability to contribute to the company’s performance.

“So jobseekers and employees need to adjust their expectations, and focus on how they can contribute in terms of skills and knowledge. What is the added value they can bring to the company,” Yeah said, adding that there is a short supply of good talent now.

“However, for employees who have the ability and can deliver the goods, they will always be rewarded by forward-looking employers who would want to retain such talent by fast tracking their promotion.”

Focus on creating a demand for labour

JobStreet’s regional communications head, Simon Si, said raising the minimum wage isn’t going to help much, as the quantum of increase will be nominal at best.

Raising the minimum wage isn't going to help much, as the quantum of increase will be nominal at best, says Si.
Raising the minimum wage isn’t going to help much, as the quantum of increase will be nominal at best, says Si.

He said that the best solution to the problems the youth are facing is to create more demand for labour by “increasing industry productivity, or creating a business-friendly environment”.

“This is so that the companies can expand, and be more productive in their operations. Then they will require more people to help them.

“It’s all about supply and demand. If there is a high supply of labour but not enough jobs, then the salaries offered will be low.

“So the question we need to ask ourselves, is if we are putting out a lot of fresh graduates into the market when the market doesn’t have enough jobs.”

He added that when the supply is more than the demand, then employers can dictate the salaries offered. This is because if one jobseeker refused the amount offered, there are others who would gladly take it up.

Malaysian Trades Union Congress secretary-general J Solomon however, said that employers should stop viewing employees as a means to achieve maximum profit.

He also agreed with calls to increase the minimum wage, and suggested for it to be set at RM1,500 on top of another RM300 in the form of a “cost of living allowance”.

“It’s not going to solve their problems but it will allow them a decent living,” he said.

An online poll carried out at bajet2018.najibrazak.com revealed that increased wages is among the things that topped the list of what Malaysians want to see in Budget 2018.

http://www.freemalaysiatoday.com/category/nation/2017/08/06/minimum-wage-hike-could-see-people-lose-jobs-says-expert/

http://www.freemalaysiatoday.com/category/nation/2017/08/26/mixed-reaction-to-fresh-grads-wanting-rm3000-starting-pay/

http://www.freemalaysiatoday.com/category/nation/2017/08/30/only-2-of-employers-willing-to-pay-fresh-grads-rm3000/