Sabah is facing an economic balancing act.
Starting February 2025, the minimum wage will rise from RM1,500 to RM1,700. The move, aimed at uplifting workers, has sparked anxiety among Sabah’s small and medium enterprises (SMEs). For many, it feels like progress on paper but pressure in practice.
“This increase is too sudden for us to handle,” said Adrian Chong, owner of a kopitiam in Lahad Datu. “We already struggle with daily expenses, and now we might have to let some staff go.”
In Lahad Datu, business owners like Chong also are weighing tough decisions.
Sabah’s unemployment rate stands at 8.71%, more than double the national average.
Businesses in the state operate under vastly different conditions compared to Peninsular Malaysia—high logistics costs, thin profit margins, and heavy reliance on SMEs.
Employment trends in Sabah highlight the challenges ahead. In 2021, the unemployment rate was 8.2%, improving to 7.5% in 2022.
However, this progress stalled in 2024, with the unemployment rate rising to 8.0% by mid-year.
Sabah’s tourism sector has been a bright spot, employing approximately 362,700 individuals in 2023, a 7.1% increase from 2022.
Sectors like retail trade and food & beverage have led the way, but the overall employment landscape remains fragile.
Sabah collected a record RM6.971 billion in revenue last year, with 68% coming from crude oil and palm oil. But for SMEs, which don’t enjoy the deep pockets of government-linked companies, the reality is grim.
To ease the transition, employers with fewer than five workers have until August 2025 to comply. RM200 million has also been allocated to help businesses adjust.
But for some, these measures feel like band-aids on a deeper wound.
“We’re not against higher wages, but we need time to adapt,” said Jessie Lim, a bakery owner in Sandakan. “If we lose more staff, both we and our customers will suffer.”
Even employees are uncertain.
“I’m happy we’ll earn more,” said cashier Aminah Bakar from Tawau. “But what happens if my boss decides to let people go?”
The Sabah Employers Association (SEA) has echoed these concerns, citing that the combined impact of the wage hike and amendments to the Sabah Labour Ordinance could increase labor costs by over 21%.
SEA President Yap Cheen Boon added that the policy’s one-size-fits-all approach ignores the challenges businesses in Sabah face daily.
SME Sabah President Dr. Deledda Tan is calling for a phased approach. “Start with RM1,600, then move to RM1,700 later. It would allow businesses to adjust without compromising workers’ livelihoods,” she said.
The Federation of Chinese Associations Sabah (FCAS) has also urged for gradual implementation.
FCAS President Tan Sri T.C. Goh highlighted that while larger enterprises may absorb the costs, smaller businesses could face closures due to increased production and operational costs.
As February approaches, Sabah faces the challenge of ensuring workers benefit without pushing businesses to collapse.
For many, it’s not just about wages but survival. – January 26, 2025.
