THE move to increase the minimum wage to RM1,050 (RM5.05 hourly wage) effective Jan 1, 2019, is very disappointing.
The increase is a 5% rise for peninsula Malaysia (from the existing minimum wage of RM1,000) and a 14% rise for Sabah and Sarawak (from RM920).
A 5% rise is too low and not enough to assist the bottom 40 (B40) households. In fact, a 5% increase is barely any better than the implied 4% yearly compounded increase by Barisan Nasional when they raised the minimum wage to RM1,000 in 2016 from RM900 in 2013.
While the 14% increase for Sabah and Sarawak sounds high, it merely equalises the existing minimum wage between the peninsula and Sabah and Sarawak, something that should have been done long ago.
The government should have increased the minimum wage by at least 10%. The additional 5% increase from 5% to 10% would have had limited incremental negative impact on businesses but would have very much benefited a B40 household.
An additional 5% increase is another RM50 into the pocket of a B40 household every month. While that sum sounds little, it is a meaningful amount as this could add another basket of groceries or a few more tanks of petrol for a motorcycle.
The Pakatan Harapan Government should also announce their plan for the minimum wage increase over the subsequent four years (after 2019) to assure the rakyat that they intend to fulfil their election manifesto promise of raising the minimum wage to RM1,500 by the end of their first term.
Announcing their plans now will also allow businesses to plan ahead and manage any negative impact. This will ensure that there is no knee-jerk reaction to pass on minimum wage increases by raising prices of goods and services which may lead to a rise in the cost of living.
The Pakatan Government should plan for a yearly increase of 9% to 10% for the subsequent four years after the January 2019 rise.
This will allow them to raise the minimum wage to more than RM1,500 by the end of their term while the quantum of the yearly minimum wage rise remains reasonable for businesses.
Given that the minimum wage increase is so low, the Pakatan Harapan Government must continue to retain its welfare policies that currently assist the rakyat specifically Bantuan Sara Hidup Rakyat (formerly known as BR1M) and stop plans of abolishing it.
This policy will provide a much needed one-off boost to the income of the B40 and help them manage the rising cost of living.
However, BR1M, minimum wage policies and measures like the abolishment of the Goods and Services Tax are only short-term measures. In the longer term, the government must execute an effective economic plan that will focus on increasing the number of skilled workers and creating high-income jobs.
This is the only sustainable way Malaysia can raise the rakyat’s standard of living and boost the income of the B40.
I expect a clearer economic plan to be articulated to the rakyat when the mid-term review of the Eleventh Malaysia Plan (2016-2020) is presented in Parliament next month.