KUALA LUMPUR: Former Prime Minister Tan Sri Muhyiddin Yassin has voiced concerns regarding the government's decision to increase the minimum wage from RM1,500 to RM1,700 starting in February, highlighting the lack of accompanying clear policies.
Muhyiddin (PN-Pagoh) acknowledged that while the wage increase would benefit employees, it could also have significant implications for the country's economy.
He warned of a potential domino effect, particularly if employers were compelled to pass on the increased labour costs to consumers.
"The decision is certainly welcomed by employees who stand to gain, and it poses no problem for employers capable of absorbing these rising costs. In fact, it could enhance the value of employee compensation in relation to gross domestic product (GDP).
"However, it becomes problematic if employers transfer the increased wage costs to consumers, leading to higher prices for goods and services. This will inevitably impact consumers' purchasing power, especially when combined with the financial burdens stemming from subsidy rationalisation, rising sales and service tax (SST), and other taxes.
"Ultimately, employees receiving the wage increase will also find their daily expenses rising," he said during the 2025 Budget debate in the Dewan Rakyat.
During the tabling of the 2025 Budget last Friday, Prime Minister Datuk Seri Anwar Ibrahim, who is also finance minister, announced the minimum wage rise to RM1,700 per month, effective Feb 1 next year and on Aug 1 next year for small entrepreneurs with fewer than five employees.
Muhyiddin said that any increase in the minimum wage must be supported by clear pricing policies and controls.
This includes strengthening enforcement actions under the Price Control and Anti-Profiteering Act 2011 to ensure that unjustified price hikes face strict penalties.
"Enforcement must be more effective, and the government needs to exercise caution in implementing any policies that could trigger a chain reaction leading to increased prices for goods and services.
"The government should also closely examine the challenges faced by small companies that struggle to cope with rising operational costs due to the wage increase.
"The ripple effect of raising the minimum wage is significant; it's not just the wage costs that companies must bear, but also operational, logistics, inventory, and other expenses.
"I am concerned that small companies unable to absorb these costs may have to lay off employees or even shut down," he said.
On subsidies, Muhyiddin said that the implementation of targeted subsidies for RON95 would directly impact the prices of goods.
"This reflects the continuation of the government's subsidy rationalisation policy. The key question is: what will be the impact on the people?
"If the subsidy for RON95 is withdrawn next year, I am certain the repercussions will be felt by the populace.
"While the government assures that only the T15 group will incur higher costs, who exactly is included in this T15 group? How many are there, and are they truly wealthy?
"With inflation projected to rise between 2 and 3.5 per cent next year, the government must reconsider its subsidy rationalisation policy."