Minimum wage hike too high for palm oil planters- associations

 

Eleven associations have called for the RM1,500 monthly minimum wage effective May 1, 2022 to be postponed as the 36 percent increase is a significant hike for oil palm planters in rural areas recovering from the Covid-19 pandemic amid crop losses, workers shortage and higher input cost.

At present, the minimum wage in 57 cities and towns nationwide is set at RM1,200 a month, and RM1,100 for rural areas.

In a statement today, the 11 associations believe that there will be ripple or knock-on effects across the board on production costs that “cannot be retracted” once the new minimum wage limit is introduced.

The 11 associations are the Malaysian Estate Owners’ Association, the National Association of Smallholders, the Sarawak Oil Palm Plantation Owners Association, the East Malaysian Planters Association, the Palm Oil Millers Association, the Malaysian Oleochemical Manufacturers, the Malayan Edible Oil Manufacturers’ Association, Malaysian Biodiesel Association, the Incorporated Society of Planters, Sabah Employers Consultative Association and Tawau Agricultural Association.

A delay in rolling out the revised minimum wage, followed with its phased incremental implementation over a longer period would allow the revision to be managed in a more systematic, transparent manner and would provide a “soft landing on its impacts”, a statement from the 11 said.

‘All economic sectors in Malaysia need adequate time to make the necessary adjustments following the worst of the Covid-19 pandemic, and to find solutions to mitigate the higher costs of essential materials resulting from the Russia-Ukraine conflict, the statement said.

Address key issue

The 11 said at the very least, any proposed wage hike must address another key issue impacting the Malaysian oil palm industry related to expediting the return of guest workers in the plantation sector, the statement said.

The associations asserted that the correct approach should involve inclusive stakeholders’ engagement under the National Wages Consultative Council (NWCC) to find the right balance between workers’ welfare and the impact on employers.

They said planters are operating at very high input costs currently following the historically high fertiliser prices along with agrochemicals and fuel.

“While it appears that planters at present have the financial capability to implement the new minimum wage amid high crude palm oil (CPO) prices, the same planters will be severely disadvantaged when the CPO price dives,” they said.

The price of palm oil hit a record high of above RM7,100 a tonne in early March supported by tight supply amid a drought in South America that affected soybean production, and supply bottlenecks for sunflower oil in the Black Sea region, but within a month, Malaysian palm oil futures have already declined about RM1,300 to around RM5,900 a tonne.

Demand and supply

The 11 associations said prices are globally driven by demand and supply and in competition with other edible oils; any rise in production costs, such as a wage hike, cannot be passed to customers or buyers, unlike other businesses.

“When commodity prices plunge, margins will diminish and there will be occasions that the cost may run higher than the selling prices,’’ they said, adding that the number of unskilled workers in the sector is sizeable.

Given a hike of this magnitude, the skilled workers across the entire supply chain, including staff and management, will also expect similar treatment, triggering an inflationary spiral throughout the industry “because wage increases once gazetted and implemented cannot be withdrawn”, they said.

-Bernama