KUALA LUMPUR: The Malaysia Chinese Assembly Hall (MCAH) has urged the government to exercise caution in considering any adjustment to the minimum wage, stressing that minimum wage policy is not simply about raising one figure.
MCAH said any adjustment would affect labour costs, consumer prices, employment, investment and Malaysia’s overall competitiveness, and a sharp increase could place additional pressure on an economy that is still adjusting.
The organisation said a more reasonable approach would be to raise the minimum wage gradually, in stages and according to a clear timeline, so that wage growth can move more closely with productivity, inflation, market conditions and economic growth.
MCAH Secretary-General Steven Lee said that based on developments over the past five years, the increase in the minimum wage has significantly outpaced overall price growth, and this imbalance should be carefully considered before the government proceeds with another round of adjustment.
He said that in 2021, the minimum wage was RM1,200 in city and municipal council areas, and RM1,100 in other areas.
The minimum wage was subsequently raised to RM1,500 in 2022 and then to RM1,700 in 2025, with the RM1,700 rate becoming fully applicable to all relevant employers nationwide from 1 August 2025.
“If we use the RM1,200 minimum wage in city and municipal council areas in 2021 as the base, the increase to RM1,700 today represents an increase of RM500, or about 41.7% over five years.
“If we compare it with the RM1,100 rate in other areas at that time, the increase is about 54.5%,” he said.
Lee noted that the latest data showed inflation at 1.8% in July 2026 and 1.9% in August 2026, while Malaysia’s annual inflation rate for 2025 was 1.4%.
“This does not mean that wages should only increase in line with inflation. However, it does show that inflation, productivity, economic growth and business affordability should all be important considerations in determining future minimum wage adjustments.”
He said that with current inflation still at around 1.8% to 1.9%, the government should consider a more moderate increase rather than a sharp jump that is far above prevailing economic conditions.
“If recent inflation is used as one of the reference points, the government could consider an increase of around 5% as a starting point for discussion, rather than making a sudden large adjustment.
“The point is not to mechanically link wages to inflation, but to avoid allowing wage adjustments to become too detached from actual economic conditions.”
On the Cabinet’s recent decision to temporarily exempt micro, small and medium enterprises from the next round of minimum wage adjustments, MCAH said this showed that the government was aware of the cost pressures and limited capacity currently faced by smaller businesses.
However, Lee cautioned that if large companies are required to adopt a higher minimum wage while micro and small businesses remain at a lower level for a prolonged period, this could create another problem.
“On the surface, it may look like the government is giving smaller businesses some breathing room, but the labour market is fluid.”
He said that if similar jobs offer a significantly higher statutory base salary at large companies, younger workers and experienced employees will naturally gravitate towards those employers.
This could result in large corporations being flooded with applicants while smaller businesses are left in a situation where “there are jobs, but no one wants to take them”.
“This could eventually create an unhealthy two-tier labour market.”
Lee said micro and small businesses are already facing labour shortages, talent loss and rising operating costs. If policy further widens the wage gap between large companies and smaller businesses, it could end up weakening the very SME ecosystem that the government is trying to protect.
He proposed that after every minimum wage adjustment, the government should allow sufficient time for the market to absorb the change.
The government should then monitor inflation, employment, SME operating conditions, labour productivity and investment before deciding whether to proceed with the next adjustment.