The government should share responsibility with small and medium enterprises (SMEs) in creating the conditions needed for businesses to pay higher wages, said Entrepreneur and Cooperatives Development Minister Steven Sim.
Sim said the Government should support employers through measures such as productivity incentives, technology and digitalisation investments, workforce training and wage subsidies.
Speaking at the EY Entrepreneur Of The Year 2026 Malaysia Top Nominees Announcement, Sim said Malaysia needed to continue raising wages to attract and retain talent, but warned that wage increases could not rely on legislation alone.
“If we push the market beyond its capacity, businesses may go out of business,” he said.
He said wage growth also needed to keep pace with productivity.
“If wages rise without productivity gains, businesses will eventually pass the higher costs on to consumers, and that leads to inflation. But if productivity rises and wages do not follow, then we will lose talent,” he said.
Sim said the Government should therefore encourage and reward businesses that invest in productivity, training and technology, including through wage subsidies.
“The Government should step in to encourage and reward businesses that are prepared to improve productivity, strengthen training, and invest in technology and digitalisation, including through wage subsidies,” he added.
He cited the Progressive Wage Policy introduced during his tenure as Human Resources Minister as an example, where employers were encouraged to raise salaries while the Government subsidised part of the increase.
Sim said wage growth should not be treated as a zero-sum contest between employers and workers, with businesses remaining profitable while sharing gains with employees.
