Budget 2027: Fomca warns wage gains could be eroded by inflation
PETALING JAYA: A pay rise on paper means little if the extra money is swallowed at the grocery checkout.
As Putrajaya lays the groundwork for Budget 2027, Malaysia’s chief consumer advocate has warned that planned minimum wage adjustments could backfire on working-class households unless the government puts in place aggressive safeguards against cost-push inflation.
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Federation of Malaysian Consumers Associations (Fomca) CEO Dr Saravanan Thambirajah cautioned that higher wages risk triggering a secondary wave of price hikes if businesses, particularly micro and small enterprises (SMEs), simply pass higher operational costs on to consumers.
“We must avoid a situation where workers receive RM200 or RM300 more in wages but lose that benefit through higher food, services and household prices.
“Higher wages should improve living standards, not simply create another round of price increases.”
The warning comes as middleincome earners in urban Malaysia find themselves increasingly squeezed by the cumulative burden of food, housing, transport and utilities.
While lower-income households remain the focus of cash assistance programmes, Fomca argues that gross income thresholds fail to capture the true financial strain faced by urban families who earn too much to qualify for welfare yet carry crippling financial commitments.
To prevent wage increases from becoming a net-zero gain for consumers, Saravanan urged the government to pair wage reforms with direct productivity support for SMEs, alongside stricter enforcement by the Domestic Trade and Cost of Living Ministry.
“Budget 2027 should therefore combine wage increases with productivity support for businesses, particularly SMEs.
“This can include automation, digitalisation, training, tax incentives and appropriate targeted assistance.
“At the same time, the ministry must strengthen price monitoring and enforcement to ensure that businesses do not use minimum wage increases as an excuse for unjustified price increases.“
Beyond protecting the gains from higher wages, Fomca is calling for a fundamental shift in how Malaysia defines financial vulnerability. Under current fiscal policy, social assistance is heavily tied to broad income classifications, principally the B40 and M40 brackets.
According to Saravanan, this blunt classification overlooks a growing “missing middle” – families whose gross income exceeds social safety net thresholds but whose net disposable income is stripped bare by unavoidable urban costs.
“Two families earning RM7,000 a month can have completely different financial situations depending on where they live, how many children they have, whether they care for elderly parents and what unavoidable commitments they carry.
“Budget 2027 therefore needs to move beyond simply asking, ‘How much does the household earn?’
“The more important question is, ‘After paying for essential needs, how much does the household actually have left?’”
To address this gap, he proposed that Putrajaya introduce a formal “Household Cost-of-Living Framework” in Budget 2027.
The framework would benchmark financial support, targeted subsidies and tax relief against real-world commitments, including childcare, healthcare, education, transport and elderly care, rather than raw salary figures.
Without broader measures to ease pressure on household budgets, he warned that higher wages may offer only temporary relief as the cost of living continues to rise.
