Cut living costs, don’t raise wages, say employers

 

Businesses need at least two years to recover from the effects of pandemic lockdowns, says MEF president Syed Hussain Syed Husman.

KUALA LUMPUR: Businesses need at least two years to recover and employers are in no position to absorb increases in wage costs, the Malaysian Employers Federation (MEF) said today.

Responding to calls for an increase in the minimum wage, MEF president Syed Hussain Syed Husman said that efforts should be made instead to control the rising cost of products and services.

“No amount of wage increases will be able to keep up with the ever-rising cost of living if no effective measures are implemented,” he said.

He said an upward revision of minimum wages would derail economic recovery and the goals of the 12th Malaysia Plan, Bernama reported.

Syed Hussain said the pandemic had caused a massive drop in performance of all economic sectors, resulting in a 5% contraction of the economy in 2020.

Despite various stimulus packages, many employers continued to face severe challenges to remain sustainable.

“We must do all we can to support existing businesses at this very critical juncture. Our top priority should be to provide more funding to revive businesses.

“We need at least two years to normalise businesses and employment,” he said.

He stressed that the private sector employers, especially the SMEs and micro-enterprises, were in urgent need of government support to enable them to retain existing employees, which would in turn help stabilise the labour market and create more quality employment in the long run.

“More than 32,500 companies have ceased operations, with more than 107,000 employees losing their jobs following the lockdowns in 2020 and 2021.

“This resulted in a higher unemployment rate of 4% in August 2021,” he said in a statement today.

Before the Covid-19 outbreak, Malaysia was at full employment, as the rate was below 4%.

However, the current unemployment rate of those between 15 and 24 years was now 12%, he said.

Syed Hussain said due to various cost-cutting measures undertaken by employers, median wages dropped to RM1,988 compared to RM2,442 in 2019. Average wages dropped to RM2,933 in 2020 compared to RM3,224 in 2019, a decrease of 9%.

Labour productivity, he said, also recorded -16% in 2020 following the reduction in the workforce, which lowered the value added Gross Domestic Product (GDP) in 2020.

He noted that throughout 2020 and 2021, the government provided RM18 billion in wage subsidies that benefitted more than 300,000 employers and 2.4 million employees.

The current grim economic scenario did not permit any upward review of the existing minimum wages, especially when more than 98% of all registered companies are small and medium enterprises and micro-enterprises.

Syed Hussain said the majority of businesses still in existence did not enjoy the same margins as before, which were only between 10 and 15% for most SMEs. This would not be enough to cover overhead costs, he said.

“To add to the cost of business now is unwise. It is more prudent to look at measures to control living costs, which will directly help wage earners. An employer’s most valuable asset is its employees, and no employer wants to see their staff face difficulties.

“Productivity and performance will also improve when all parties are happy and safe,” he said. - FMT