Higher minimum wage not a silver bullet, but crucial for income growth, says Johan Merican

KUALA LUMPUR, Oct 13 — The implementation of the RM2,000 minimum wage next June is structured to provide businesses and corporations with an adequate transition window to adjust their salary frameworks, Treasury Secretary-General Tan Sri Johan Mahmood Merican said.

Speaking to reporters following the Post-Budget 2027 Debate organised by the Malaysian Economic Association in Kuala Lumpur yesterday, Johan identified sluggish wage growth relative to living expenses as the primary driver of household financial strain, even as headline inflation remains contained.

“This is why driving up the people’s earning power is so critical. Raising the minimum wage is part of that strategy.

“While it isn’t a silver bullet on its own, it plays a vital role and we are starting with large companies,” Johan said.

Johan said that the broader policy goal extends beyond lifting wages for entry-level workers to preventing wage compression, an outcome where pay raises for the lowest tier inadvertently squeeze differentials while intermediate salaries remain stagnant.

“The hope is that these large companies will also look at their overall salary structures and make adjustments based on the increase in the minimum wage.

“This is why the government mandated that government-linked-companies (GLC) adopt a living wage baseline of RM3,400, setting a benchmark for the private sector to follow when determining salary levels,” he said.

Johan noted that the RM2,000 baseline was deliberated and endorsed without contention by the National Wages Consultative Council, which comprises representatives from both trade unions and employer federations.

Extended adjustment window for small businesses

However, the Cabinet decided to grant an extended adjustment grace period for micro, small, and medium enterprises (MSMEs) to buffer them against operational cost shocks while they navigate the economic spillover effects of ongoing Middle East geopolitical tensions.

Alongside the RM2,000 statutory minimum wage and the RM3,400 GLC living wage threshold, Johan said the government will also maintain momentum on the Progressive Wage Policy, with plans also underway to introduce a dedicated minimum wage tier for semi-skilled occupations.