The Malaysian Association of Hotels (MAH) believes that the continuous increase in wages is not the solution and does not augur well for the hospitality industry and the economy.
MAH Chief Executive Officer, Yap Lip Seng said that the fact is most hotels are already paying salaries higher than the current minimum wage and if it includes other non statutory benefits employers are providing, it further exceeds even the proposed new minimum wage.
“The problem lies in the definition of wages that at the moment with the minimum wage order, restricted to “basic wage” only, does not promote productivity or efficiency, and it also does not encourage employers to provide better motivational benefits to employees.
“The continuous increase in basic wages in actual fact does not increase national productivity and instead it does more damage to the economy by forcing inflation with the same or even less production,” said Yap in a press statement today.
He added that productivity is key to growth and it differs from different industries and this is the main reason why a same mandatory minimum wage for all industries and sectors will not work. By forcing a same minimum wage on entry, the workforce of different industries carrying different work values will in turn force sectors of higher value to increase it even higher.
“For example, when comparing a waiter at a small restaurant to a restaurant in a 5-star hotel, where the hotel will definitely be paying more on top of benefits, in most cases already above the proposed minimum wage, but is now forced to pay even more to differentiate the value of work of the different establishments.
“And this is further aggravated as it cascades upwards in an organization such as a hotel with multiple positions and levels, ie Captain, Supervisor, Executive, Manager and so on. And all this while the same persons are still doing the same job and same amount of work,” said Yap.
He explained that in a direct cost based business model, the additional costs will be channelled to customers through a price increase, or in other words, widespread inflation. But unfortunately in a hotel environment where demand and price fluctuates to market trends, hotels will most likely be forced to absorb the losses. This will not go well with the hotel industry as it struggles to recover with limited resources and after having lost talents throughout the pandemic.
“On a larger view, due to the Government’s commitment to ensure equal remuneration without discrimination, the minimum wage will apply to all workers including foreign workers. While we acknowledge the contribution of foreign workers to the country’s economy, we must also understand the implications of increasing minimum wage with this rather large group of workers.
“The millions of foreign workers is the group that will benefit most from the increase in minimum wage, by doing the same job, the same load and work time, they are given a 25% increase in wages of which most if not all will only be sent back to their own country. This is why the GDP of countries like Nepal is highly dependent on remittances, contributing over 30% of the country’s GDP.
“Increasing minimum wage blindly without addressing needs of different sectors and industries is not a good policy. Contrary to popular beliefs, salary is not to be blamed for unemployment, the Government needs to address various economic and also social factors impacting unemployment as well as underemployment,” concluded Yap.