Malaysia's Proposed Minimum Wage Hike Could Accelerate AI Adoption, Warns Analyst

Malaysia's proposal to raise the minimum wage to RM3,100 (approximately $650 USD) monthly could significantly speed up the adoption of artificial intelligence and automation across various business sectors, particularly if labor cost increases are not met with corresponding productivity gains. This potential shift raises concerns about job displacement.

Ronnie Liu Tian Khiew, a former senior DAP leader, suggested that employers confronting a sharp rise in labor expenses might view technology as a more financially attractive alternative to human employees. He cautioned that the goal of increasing worker income should not inadvertently lead to a reduction in employment opportunities.

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Previously, businesses might have considered machines too expensive for positions paying RM1,700. If labor costs increase rapidly, the return on investment for AI, self-service systems, robotics, and automation will suddenly become very attractive. The end result might not be everyone getting RM3,100, but rather businesses hiring fewer people while paying higher salaries to the remaining workers.

"Previously, businesses might have considered machines too expensive for positions paying RM1,700," Liu stated. "If labor costs increase rapidly, the return on investment for AI, self-service systems, robotics, and automation will suddenly become very attractive. The end result might not be everyone getting RM3,100, but rather businesses hiring fewer people while paying higher salaries to the remaining workers."

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Minimum wage policy must be formulated alongside employment policy. If we want wages to increase, we must also ensure productivity increases.

Liu emphasized that the government must ensure wage increases align with productivity improvements, enabling employers to genuinely afford higher pay. He proposed measures such as expanding financing for small and medium-sized enterprises (SMEs), offering digitization and automation incentives, and providing retraining for workers affected by technological changes. The government also needs a transition plan for sectors facing higher cost pressures to prevent employers from reducing hiring or closing operations.

"Minimum wage policy must be formulated alongside employment policy. If we want wages to increase, we must also ensure productivity increases," Liu said. He noted that existing frameworks like the New Industrial Master Plan (NIMP) 2030 and the Progressive Wage Policy (PLWS) offer a foundation, but these need integration into a more comprehensive strategy. "The government not only needs to demand businesses pay higher wages but help them build the capacity to be able to pay higher wages," he concluded. The ultimate aim, he stressed, is not just setting a minimum wage figure but fostering a high-productivity economy where workers generate greater value and earn better incomes.

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The government not only needs to demand businesses pay higher wages but help them build the capacity to be able to pay higher wages.