Budget 2025: Minimum Wage Increase to RM1,700

The announcement of Budget 2025, which sets a minimum wage increase to RM1,700 starting from 1st February 2025, has been welcomed by a portion of the population, particularly those who were previously receiving the RM1,500 minimum wage. This move is seen as the government's effort to improve living standards and narrow the income gap. However, while it may seem like good news, its impact needs to be analyzed more deeply, especially from the perspective of long-term economic effects and its overall effectiveness across the employment sector.

Firstly, this minimum wage increase may not necessarily be uniformly implemented by all employers. Although it is a regulation, not all types of jobs will receive an equivalent increase. Employers may face difficulties retaining long-term employees if they are not given raises that match their experience, while new workers receive the same pay. This situation could cause dissatisfaction among veteran employees, who are tasked with mentoring new hires but receive the same wages without a proper raise. This raises questions about fairness in wage structures.

Moreover, there is a risk that this minimum wage hike will lead to an increase in the prices of goods and services. Employers, especially in the private sector, may transfer the cost of wage increases to consumers by raising the prices of products and services. This could potentially raise the cost of living, ultimately putting pressure on low- and middle-income earners. In this scenario, the minimum wage increase might not bring significant benefits to workers but instead burden them with other rising costs.

Another side effect to consider is the impact on purchasing power and unemployment rates. If employers cannot afford the increased wage costs, they may be forced to lay off workers or freeze new hires, which could increase the unemployment rate. In certain sectors, consumer purchasing power, which is already weakened, may be further impacted as the prices of goods and services rise sharply. Investors may also adopt a cautious approach towards Malaysia's economy if business costs rise, which in turn could reduce Malaysia's attractiveness as an investment destination.

Overall, while the move to raise the minimum wage is an effort to ease the burden on workers, the government must consider the broader economic impact. A more comprehensive solution might involve increasing quality job opportunities and strengthening the social safety net for low-income groups. This way, not only will the minimum wage rise, but the overall well-being of the population can improve without creating additional economic pressure.