Wage hike sparks cost of living concerns

PETALING JAYA: Malaysia’s move to raise the minimum wage by RM200 to RM1,700 does not account for the disparity in cost of living across different states, says an economist.

While the RM1,700 wage may be manageable in the Klang Valley, it could strain businesses in regions where the cost of living is lower, said Dr Carmelo Ferlito, CEO of the Centre for Market Education.

This could potentially distort local economies, he said.

During the tabling of Budget 2025 on Friday, Prime Minister Datuk Seri Anwar Ibrahim said the minimum wage would go up from RM1,500 to RM1,700 effective Feb 1 next year.

Ferlito, when contacted, cautioned that the new minimum wage would not catapult the country to high-income status.

In fact, it could have the opposite effect, he said.

He said that enforcing wage hikes ignores the realities of market dynamics and sustainable growth.

Moreover, Ferlito said it could lead to job losses, particularly for low-skilled workers.

He said businesses may be driven to replace employees with automation to offset the rising costs.

“The workers may eventually get retrenched and replaced with machines,” he said.

As for young Malaysians, a number of them voiced their concerns about the rising cost of living.

Firdaws Azam, 20, a university student, said he was unsure about the wage hike, explaining that while it seemed like a beneficial thing, it could also lead to higher living costs.

“While the additional RM200 means extra money in the pocket, I wonder if that will be enough because surely the cost of living will go up too, right?” he asked.

He voiced concerns about the challenges he might face in the future if he started his own business.

“I feel that I would struggle a lot since the cost (of operations) will increase, which means I have to impose that (additional) cost on my buyers.”

Sportsman Efrain Feerzan, 19, feels that the increase is a positive step, but he is uncertain about its broader impact.

“I have done some travelling in the last few years, and I noticed that high-income countries provide higher wages to their people, so I do see this increase as a positive effort,” he said.

However, Efrain expressed concerns about whether the higher wages could lead to increased costs for everyday necessities.

“In Australia, for example, they have a higher minimum wage, but the amount of money we pay just for a meal at a restaurant is shocking, which must mean their cost of living is high,” he said.