Minimum wage hike a balancing act

Offsetting costs: The government has been urged to regulate the price of raw materials so that restaurant operators could keep their prices affordable with the upcoming minimum wage hike.

PETALING JAYA: The RM1,700 minimum wage from next year has led to divergent views, with eateries cautioning about price increases, but consumer groups are happy that low-wage earners will get better pay.

Malaysian Indian Restaurant Owners Association president Datuk J. Govindasamy said the new minimum wage would lead to prices going up between 20% and 30%.

He said a rise in operating costs had been evident during past revisions of the minimum wage.

“Operating costs are already on the rise with the removal of the diesel subsidy and the price increase of raw materials. Little is being done to control the price rise of raw materials, but the authorities are often quick to scrutinise the prices of end products.

“While the government is giving out perks to the people in some ways, it appears to be taking it back by imposing such policies,” he said.

Budget 2025, which was tabled on Friday, stated that Malaysia’s minimum wage would go up from RM1,500 to RM1,700 effective Feb 1 next year.

When contacted, Govindasamy urged the government to regulate the price of raw materials so that restaurant operators could keep their prices affordable.

He also said the proposal to have foreign workers contribute to the Employees Provident Fund (EPF) would further compound the situation.

He questioned the need for these foreigners to have such savings, given that most of them build their nest egg by sending their wages to their families in their homeland.

“Employers will need to contribute another 12% to a foreign worker’s EPF,” he said.

ALSO READ: Wage hike sparks cost of living concerns

Restaurant and Bistro Owners Association vice-president Jeremy Lim lamented about ways to keep prices down when costs were rising.

“This will surely impact the consumer. Policymakers should consult the industry players to get a true picture on the ground prior to making such proposals,” he said.

“It is a difficult period for operators as the industry has not recovered to its pre-pandemic days.”

Malaysian Muslim Restaurant Owners Association (Presma) president Datuk Jawahar Ali Taib Khan spoke of the delicate balance for businesses to maintain profitability without burdening customers with higher prices.

“Labour costs typically make up a significant portion of expenses. Raising minimum wages and levies on foreign workers will directly impact businesses, particularly those in labour-intensive sectors like the food and beverage industry.

“With higher operational costs, operators may have no choice but to pass these additional costs to consumers,” he said.

With tight profit margins, he said restaurant operators might need to raise prices if they are unable to absorb the increase in costs through other cost-cutting measures.

“This will start from the manufacturer to the wholesaler and eventually the retailers,” he said.

However, consumer groups commended the government on the new minimum wage, calling it long overdue for workers, especially those in cities and urban areas.

ALSO READ: Need to move faster towards higher wages

Federation of Malaysian Consumers Association (Fomca) president Datuk N. Marimuthu said the raise would help workers cope with inflation and the cost of living.

“In fact, I am disappointed that the minimum wage has only increased to RM1,700. It should be RM2,000 instead, especially for those working in big cities.

“Higher wages will increase productivity and help lower corruption. We should not compromise on wages,” he said.

To address the rising costs, Marimuthu said the government should increase allocations under its cost of living initiatives for lower income groups, such as the Payung Rahmah Madani, to at least RM1.5bil.

“With 30 million Malaysians out there, RM300mil under the Payung Rahmah initiative is insufficient, as such aid is needed by a large fraction of them,” he said.

Consumers Association of Penang president Mohideen Abdul Kader echoed similar support for the wage increase, saying that people should learn to cope with any rise in the cost of living from the wage revision.

“It is a good move, and I believe the government will revise this by increasing wages from time to time in the future. The living wage for a single person at the very minimum should be RM2,000 to meet their very basic needs and to live comfortably.

“Otherwise, they will fall below the poverty line. Food prices will rise, but CAP has been advocating people reduce their expenditure by preparing their own food or eating at home. We have become too dependent on outside food and delivery services.

“This lifestyle must change with some creative ways and adjustments. Eating out occasionally is acceptable, but it is unhealthy if it’s done daily,” he said.