MCA flags potential problems and loopholes in progressive wage policy

PETALING JAYA: The MCA has raised concerns over the progressive wage policy, citing potential imbalances, employee dissatisfaction and increased competition among small and medium enterprises (SMEs).

The party's economic and SME affairs committee chairman Datuk Lawrence Low pointed out that if the policy only benefits one million out of the approximately four million employees in the country, it could cause dissatisfaction among others and create imbalances among SMEs.


Low, who is also a party vice president, told a press conference on Monday (Jan 29) that there could be a long-term impact on businesses' operations and inflation if the government does not fund the pilot project beyond its first year.

Employers may also face challenges distributing incentives based on employee performance, and therefore have difficulty maintaining staff satisfaction.

"Currently, only Singapore has a similar policy, with no other countries as a reference. This one-year pilot project is supported by government funding.

"However, there are concerns about whether it will increase operational costs for businesses and potentially lead to inflation in the second year and beyond," he said.

ALSO READ: Progressive wage policy to undergo dry-run from June next year, says Rafizi

The progressive wage system is scheduled for a pilot run from June to September.

"As a political party supporting the government, MCA has a responsibility to monitor government policies.

"(After) discussions with businesses and employees, we unanimously express confusion regarding this progressive wage system. We hope the minister concerned can announce the details as soon as possible," he added.

At the same press conference, the party's public policy and people's livelihood research advisory committee chairman Dr Monna Ong Siew Siew pointed out several flaws in the proposed system.

Firstly, she said, the lack of clear selection criteria may lead to unfair competition and uncertainty among businesses.

Secondly, the policy favours low-skilled jobs but does not address who should bear the cost of government-mandated training courses. This can potentially increase operational costs and contribute to inflation, she noted.

ALSO READ: MEF: Employers ready for progressive wage policy, but some housekeeping needed

Dr Ong emphasised the need for meaningful dialogue between the government and industry players before implementing the policy.

Thirdly, she said the new policy suffers from a silo mentality in the government, as key ministries related to training and job placement are excluded.

She proposed closer collaboration involving the Human Resources Ministry, the Higher Education Ministry, and industry to align courses with market needs and improve the competitiveness of local graduates.

Lastly, Dr Ong highlighted that the remaining 40% of employees who do not support the progressive wage model have not had their perspectives, anxieties and concerns addressed.

"The Economy Ministry should conduct more in-depth research, particularly focusing on different age groups, to ensure the policy is aligned with reality and achieves immediate results," she added.

Economy Minister Rafizi Ramli presented the White Paper on the Proposed Progressive Wage Policy in Parliament on Nov 30.

It aims to ensure that workers receive higher wages in line with increased productivity and contains three main mechanisms, namely voluntary implementation, incentive-based approaches, government allocation injections, and the responsibility of workers to enhance productivity.

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