BUDGET 2025: CALL FOR GOVT INCENTIVES TO HELP MSMES IMPLEMENT MINIMUM WAGE

IPOH, Oct 25 (Bernama) -- The government is called upon to provide suitable incentives for businesses, particularly micro, small, and medium enterprises (MSMEs), that may be impacted by the introduction of the RM1,700 minimum wage for employees, effective Feb 1, 2025.

Universiti Pendidikan Sultan, Faculty of Management and Economics, Head of the Economics Department, Assoc Prof Dr. Zainizam Zakariya, pointed out that while the increase in minimum wage benefits employees, it also carries implications from both micro and macroeconomic perspectives.

He suggested that the government could consider incentives, such as reducing corporate taxes to help employers cope with rising wage costs, or offering financial assistance to MSMEs impacted by the minimum wage implementation.

"This approach has been adopted by several developed countries such as Australia, Singapore, and Sweden. For instance, Singapore’s Wage Subsidy Programme supports employers by providing subsidies to companies that hire low-income workers.

"Studies by the Organisation for Economic Co-operation and Development (OECD) have shown that wage subsidy programmes can help companies reduce costs without cutting jobs," he told Bernama.

He added that the government could also introduce subsidised training programmes to help workers upskill and offer grants or low-interest loans to assist businesses in adapting to new technologies, as seen in Sweden.

“There are concerns among employers about their ability to maintain the same workforce due to higher labour costs, especially in the agriculture, manufacturing, and construction sectors.

“This could lead to layoffs or reduced working hours as companies try to manage rising operational costs,” he explained.

Zainizam further noted that MSMEs may invest less in innovation or productivity improvements, focusing instead on cutting short-term costs to survive, which could hamper their long-term growth and global competitiveness.

Meanwhile, Perak Consumer Movement member Khairul Anwar El Syazalli Musa offered a different perspective, suggesting that MSMEs collaborate with larger companies in similar industries to address the challenges of the wage increase.

"I see this as possibly one of the government's strategies to identify unproductive small businesses, as there are many that spring up like mushrooms but fail to deliver good results.

"To address the wage increase issue, small companies could consider advancing by first merging with larger firms to learn about their operations. This can help reduce management costs, which in turn could offset the impact of the wage hike.

"From another angle, laying off unproductive workers is not necessarily a negative move, as higher wages should correspond to employee productivity. When this balance is achieved, smaller companies can grow, generate profits, and ultimately contribute to boosting the national economy," he said.

He acknowledged that the wage increase poses significant challenges for MSMEs, but stressed that it is necessary to implement it so that, over time, employees are better protected, income inequality is reduced, and the people's standard of living improves.

-- BERNAMA