Minimum wage policy - boon or bane to SMEs?

Source From (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/habs/Article/

Published: on 07 May 2012

ON Workers Day, the minimum wage policy made headlines in mainstream newspapers and online media. The much-awaited news generated comments and opinions from industry players, stakeholders and man-on-the-street - whether it will be a boon or a bane for businesses.

I detected a mixed reaction from the industry. While some rejoice on the wage hike, others, such as the SMEs, were quite sceptical on the repercussions of the implementation and have expressed resistance. By the sheer size of the "smallness" of a company and with limited operational funds, some SMEs, in particular the micro-enterprises, found the minimum wage policy a challenge.

But who said change is ever going to be easy? Deepak Chopra once said: "All great changes are preceded by chaos." To me, the implementation of minimum wage policy is timely. It signals the government's commitment to greater inclusiveness and reduction of poverty. The new policy is deemed to benefit some 3.2 million workers, or about 25.8 per cent of total employment, many of which are from low income group.

I would say that the implementation of this policy will not only increase job satisfaction, but will also have the domino effect of boosting the entire productivity chain of an organisation and the country at large. This move should definitely be able to pump up morale of low income employees who had issues of making ends meet and burdened with debts in order to survive.

Indeed, this move is crucial to achieve the government's objective of creating a high income nation by 2020. By implementing this policy, over time, we hope to see the low-wage, low-consumption and informal labour market transform to a high-wage, high-consumption and formal labour market.

In addition, the minimum wage will hand in more money to the workers, giving them the opportunity to consume more on basic needs, housing, utilities, fuels as well as transportation.

This scheme is designed to enable thousands of workers to lead a better life and be more diligent and efficient. The past has seen a lot of workers with no alternative but to work for low wages, and this led to a high rate of absenteeism, worker turnover and poor performance. Workers need to work a few jobs a day to make ends meet.

While this policy is being overwhelmingly accepted by the employees, it's heartening to know that on the perspective of the employers, our survey showed that majority of our SMEs are agreeable to minimum wages. A fraction of the business community, especially the micro business owners who rely on cheap labour, might feel some aches and pain along the way.

Studies carried out by National Wage Consultative Council/MOHR have also showed that the enforcement of the minimum wage of RM900 per month will reduce the demand for migrant workers by up to 6.1 per cent over the next four years (2012-2015).

Maria Robinson said, "Nobody can go back and start a new beginning; but anyone can start today and make a new ending." So, I would certainly urge micro businesses to have a re-look at their business models. You need to automate, stop relying on cheap foreign labour and undertake a totally new business transformation yourself. Rest assured that the government will not introduce new policies to burden businesses. When new policies such as that of the minimum wage is formulated, all stakeholders were consulted to ensure that supporting systems are in place to cushion the after-effects.

In this context, SMEs are given between six and twelve months grace period to restructure their wage scheme, while some industries are allowed to ask for an extension. To further assist the SMEs to cope with the new policy, the government will provide structured training to increase workers' productivity.

I believe that the minimum wage policy should not be a cause for concern and employers will eventually get adjusted to it. Currently, only the unskilled, new, and general workers get a wage lower than the minimum wage, and in any typical SME, only about 20 per cent are in this category.

It should be looked upon as part of the government's eradication of poverty and it will do good for the country in many different ways and forms.

The multiplier effect resulting from increased income and consumption due to imposition of the minimum wage could be a boon during the current economic climate.

If we are looking for progress, let's reflect what George Bernard Shaw said: "The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man."

Datuk Hafsah Hashim is the chief executive officer of Small and Medium Enterprises Corporation Malaysia (SME Corp Malaysia)