Johor's higher wages plan to lure locals to SEZ needs teeth to work

New regulations or financial incentives required for firms to pay more, say experts

- Harith Mustaffa

A plan by Johor to encourage highly skilled Malaysians to work in the Johor-Singapore Special Economic Zone (JS-SEZ) by offering higher salaries is not likely to pan out, unless employers are bound by new regulations or given big financial incentives to pay these pumped-up wages, experts say.

The move to boost salaries in Johor is tied to the government's plan to attract high-value employers, such as data centres and family offices managing the wealth of the super rich, thereby stemming the flight of skilled workers seeking higher-paying jobs abroad, including in Singapore.

To draw more locals to the southern Malaysian state, the government wants employers to offer starting salaries of RM4,000 (S$1,200) for diploma holders and RM5,000 for degree holders in targeted sectors. Officials have previously said such sectors include artificial intelligence, information technology, data centres and financial services.

Experts say Johor needs to find a way to help companies fund part of the higher wages, or to lay out clearly the wage requirements for companies setting up operations in the JS-SEZ. If the government were to mandate an outright wage-floor policy, this could deter companies from coming in.

"Firms are not just going to pay higher wages without getting government subsidies or incentives," Dr Oh Ei Sun, senior fellow at Singapore Institute of International Affairs, told The Sunday Times.

Without a statutory requirement, these companies are not legally bound to comply, CIMB Securities said in its response to queries about the wage model from ST.