RECENT comment on social media by an economic expert who urged people earning RM1,500 monthly tomanage their finances better was met with criticism by the public.
Not a surprise as many people are grappling with the high cost of living following the rise in the prices of goods and daily necessities.
One may point to global forces that have disrupted our lives, be they climate change that has affected the cost of agricultural products, the Russia-Ukraine conflict that caused a disruption to the global supply chain, or the misery and chaos inflicted by the Covid-19 pandemic.
But these sudden pressures are real, and with that, the new minimum wage of RM1,500 has come into question. Many are saying that it is not "livable" as everything costs more.
For sure, workers had welcomed the raise in minimum wage when it was introduced in May. It was last raised in February 2020, from RM1,100 to RM1,200. A cursory look at other countries also saw them leaning towards minimum wage increases, such as in South Korea, Taiwan and Laos.
Japan, for instance, increased its minimum wage by about three per cent every year for four years until 2020, when it was put on hold because of the economic fallout from Covid-19. In the United States, ahigher minimum wage commenced this month in Connecticut, Nevada, Oregon and Washington DC.
Undoubtedly, raising the minimum wage has unintended consequences, such as businesses increasing prices, thus fuelling inflation. For some, it resulted in wages and salaries increasing across the board, and substantially escalating the operating expenses for companies that would then up the prices of products and services to cover labour costs.
The single largest problem is that it will see higher unemployment for low-skilled workers and young people, as employers respond by reducing the number of employees, according to studies done by the Fraser Institute, a Canadian public policy think tank.
For Malaysia, it is the swelling of operational costs for employers in various economic sectors, and workers finding the wage insufficient when the cost of living is taken into account, among others. In Kedah, childcare centre operators are in a quandary about how to deal with the new wage.
They probably have to charge more for their services. Most likely, parents will send their children elsewhere due to budgetary constraints. What is next moving forward?
The government may want to refer to the concept of living wage by Bank Negara Malaysia (BNM), which set the rate at RM2,700 in 2017. Of course, proposing another wage increase may seem preposterous, butremember, the living wage rate set by BNM was five years ago, nearly double that of the current minimum wage.
Or consider this opinion from Universiti Utara Malaysia economist Dr Irwan Shah Zainal Abidin — for the government to introduce policies such as a universal basic income, job guarantee scheme, or a universal pension scheme with other options like universal social protection and universal basic services.
The drawback is that such policies would only be fruitful in the medium and long term. In the meantime, short-term measures, including cash handouts, will still be needed, especially for the B40 and other vulnerable groups.