MCA: Sustainable wage growth must be backed by productivity, value creation

 

AN MCA leader has called for a balanced approach to raising workers’ wages, saying higher pay must be supported by stronger productivity, greater value creation and sustainable business growth.

Its vice president Datuk Seri Dr Wee Jeck Seng’s comments come as the government prepares measures to encourage private-sector wage growth, with Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim saying proactive measures would be detailed in Budget 2027.

Wee said raising workers’ incomes was essential to improving Malaysians’ living standards, but wage growth could not rely solely on government mandates.

“For wage growth to be sustainable, businesses must also build the capacity and incentive to pay more by improving productivity, creating greater value and establishing a fair mechanism to share the gains,” the Tanjung Piai MP said.

He said wage policies should take into account differences in business models, operating costs and profit margins, particularly among small and medium-sized enterprises.

“If labour costs rise without matching productivity gains, businesses may respond by raising prices, reducing hiring or cutting investment,” he continued.

“As a result, workers might earn more on paper without seeing a corresponding improvement in their real purchasing power.”

Wee noted that high business turnover did not necessarily translate into high profits, as companies must manage costs including rent, utilities, raw materials, transportation, financing, taxes and statutory contributions such as the Employees Provident Fund (EPF), Social Security Organisation (SOCSO) and Employment Insurance System (EIS).

He said businesses needed sufficient profits and cash flow to reinvest, expand operations and improve employee compensation.

“The crucial challenge is determining how workers can fairly share in the additional value generated,” he stressed.

Wee proposed stronger alignment between Government support measures and companies’ efforts to improve productivity and wages.

He said tax incentives, automation assistance, skills training and productivity grants could be structured to support businesses that invest in higher-value activities while improving employee pay and career development.

“Clearer policy support should be extended to companies that actively invest in automation, digitalisation and upskilling while sharing the resulting productivity gains with their staff,” he noted.

Wee further stressed the importance of improving workers’ skills as part of efforts to support higher wages.

He said businesses and employees should be viewed as complementary partners in driving sustainable economic growth, with companies creating higher-value opportunities while workers develop the skills needed to take on more productive roles.

“By enabling employees to become more skilled and helping businesses create higher value, Malaysia can foster an economy where higher wages are supported by both business ability and incentive,” he stated. ‒  Focus Malaysia