Malaysia marked Labour Day with Prime Minister Najib Razak announcing plans for the first minimum wage for private-sector employees in a move that would benefit more than 3 million low-income workers.
The opposition Socialist Party held a peaceful rally in downtown Kuala Lumpur on Tuesday, demanding higher wages and labelling the scheme as a "satire for the election" expected in the next few months. Some small and medium-size businesses are also worried it would hurt their competitiveness.
In a televised speech late Monday, Najib said the minimum monthly pay would be 900 ringgit ($297) for private-sector workers in peninsula Malaysia and 800 ringgit ($264) in the poorer eastern states of Sabah and Sarawak.
It will not include domestic workers such as maids and gardeners, he said.
Najib said a government survey in 2009 found that about 34 percent of the country's workers earn less than 700 ringgit ($231) a month, below the national poverty line of 800 ringgit.
"This is a special present from the federal government to all employees in our beloved country," Najib said
"The introduction of the minimum wage is a historic moment for Malaysia. The lowest-paid will now be guaranteed an income that lifts them out of poverty and helps ensure that they can meet the rising cost of living," he said.
Najib has earlier given cash handouts to low-income families and raised the salaries of civil servants, and the minimum wage is seen as another initiative aimed at bolstering support for his ruling coalition ahead of polls.
There is no minimum wage for the public sector, but entry-level wages there are more than 900 ringgit a month, officials say.
Some employers warned the minimum wage would force some businesses to collapse and cause unemployment and inflation to soar.
Malaysian Employers' Federation director Shamsuddin Bardan said 98 percent of Malaysian businesses are small and medium-size and would be hit by the scheme.
"The 900 ringgit level is too high for those in small towns and remote villages. It will be a challenge for them to implement. Similarly for Sabah and Sarawak, wages will rise by 40 to 90 percent," he said.
"We feel the situation will be better managed if wages are linked to productivity and skills of employees," he said.
The Socialist Party called it a "cunning election announcement."
With some employers given up to a year to comply, it warned the government may delay implementation or reverse the policy after polls. It said in a statement the scheme was also discriminatory against those in Sabah and Sarawak where poverty was higher and could widen income disparity between peninsula and east Malaysia.
Some 500 people from the party and other workers staged a rally in Kuala Lumpur, demanding minimum wage of 1500 ringgit ($496) a month with government subsidies to help small businesses cope.
"Until and unless this minimum wage is implemented immediately, we would like to call this a bluff," it added.
Najib said a World Bank survey showed that Malaysian wages rose an average 2.6 percent a year in the past decade, while labor productivity rose 6.7 percent.
He said a minimum wage would help Malaysia move toward its goal of becoming a high-income, developed nation by 2020.