Supporters of the government's decision argue that prioritizing higher wages is a smart way to build sustainable tax revenue. When workers earn more, they spend more, boosting consumption and economic growth. A larger tax base then emerges naturally from higher incomes, reducing the need for unpopular new taxes.
This approach also addresses deep public skepticism toward tax increases. The repeal of the GST in 2018 showed how sensitive voters are to broad taxes. By improving living standards first, the government can create goodwill and make future tax reforms more politically acceptable.
Low-income workers are the biggest winners from wage hikes. Higher pay reduces reliance on subsidies and welfare, indirectly improving the government's fiscal position. Businesses gain from stronger consumer demand, which can offset higher labor costs over time.
Critics worry about short-term revenue gaps, but proponents believe the strategy aligns with Malaysia's goal of becoming a high-income nation. Forcing tax base expansion without raising wages could stifle domestic demand and undermine economic recovery.
If wage growth leads to higher consumption tax receipts and personal income tax contributions, the government's patience may pay off without needing broad taxes. The focus on wages is a bet on demand-led growth.