Former Economy Minister Rafizi Ramli has questioned how wages for workers employed by micro, small and medium enterprises (MSMEs) will rise if their employers are exempted from the government’s upcoming minimum wage increase, arguing that the Progressive Wage Policy should be expanded to prevent these workers from being left behind.
His comments follow the Cabinet’s decision to temporarily exempt MSMEs from the new minimum wage increase, with Entrepreneur Development and Cooperatives Minister Steven Sim Chee Keong saying the move was intended to protect smaller businesses facing higher operating costs and economic pressures. Sim said the government would instead consider measures including wage subsidies under the Progressive Wage Policy to help MSME employees earn more as productivity improves.
The details of any new minimum wage rate are expected to be announced when Budget 2027 is tabled on Oct 9. The government has yet to confirm the quantum of the increase from the current RM1,700 rate.
In a social media post, Rafizi said exempting smaller employers from a statutory wage increase did not resolve the income pressures faced by their workers.
He argued that living costs such as rent, groceries and family expenses applied regardless of whether a worker was employed by a large corporation or a small business.
Rafizi said the policy debate should therefore go beyond the minimum wage and address the broader wage structure, including salaries for experienced and skilled employees and graduates.
He warned that if only the lowest-paid workers receive substantial wage increases while salaries higher up the ladder remain stagnant, wage compression could reduce the financial incentive for workers to pursue further education, acquire additional skills or take on greater responsibilities.
At the same time, Rafizi acknowledged that many MSMEs may not have the financial capacity to absorb significantly higher wage bills immediately.
He said this was where the Progressive Wage Policy should play a larger role, with the government providing temporary financial assistance to employers to raise salaries while linking increases to employee training and skills development.
Under such an approach, higher productivity would eventually allow businesses to sustain better wages after government assistance ends, he said.
Rafizi argued, however, that simply committing to continue the Progressive Wage Policy would be insufficient without greater funding and wider participation.
“Without additional allocation, its impact risks remaining limited, while the low-wage problem is much larger,” he said.
He also questioned whether political considerations could influence decisions on expanding the policy, saying workers’ interests should not suffer because a programme may be associated with a particular political figure.
Rafizi said the ultimate test of government wage policies should be the number of workers — including those employed by MSMEs — whose living standards genuinely improve.
