Malaysian Real Wages On A Massive Decline

Former Bank Negara Malaysia governor, Tan Sri Muhammad Ibrahim, has recently said that Malaysians’ real wages have declined nearly threefold over the past 40 years.

According to reporting by the New Straits Times and Sinar Harian, the Tan Sri noted that fresh graduates today tend to earn between RM2,000 and RM3,000 a month. This is a somewhat modest increase from the RM1,300 monthly starting salary he received in 1984, despite decades of inflation.

Graduate salaries should be closer to RM7,000 – RM8,000 today

When adjusted for five percent annual inflation rate. Tan Sri Ibrahim says that graduate salaries should be closer to RM7,000 to RM8,000.

“This equates to the purchasing power of RM300 – RM400 in the 1980s. In reality, wages have eroded by at least threefold,” said the Tan Sri.

He also warned that without significant overhauls to Malaysia’s education and economic structures, the future looks bleak for the next generations, who may be trapped in low-skilled, low-paying jobs.

Stuck in middle-income trap due to reliance on low skill foreign labour

It was also noted that Malaysia has been stuck in a middle-income trap for years, with wages barely improving alongside multiple structural issues. Said issues include Malaysia’s heavy reliance on low-skilled foreign workers, failure to generate high-quality jobs, and an outdated education and skills training system.

As at 31 December 2024, Malaysia’s labour force was numbered at approximately 16.78 million, with 14 percent or 2.37 million being foreign workers. The majority of these foreign workers are employed in the 3D (dirty, dangerous, and difficult) sectors like plantations, construction, manufacturing, and domestic services.

“These workers are generally low-skilled and inexperienced, which makes them cheaper to hire and puts direct wage pressure on Malaysia’s low-income earners,” said Tan Sri Ibrahim.

Malaysia risk becoming a net exporter of labour

He also mentioned that Malaysia has fallen behind in generating large-scale, high-value jobs for its citizens. The issue is exasperated by brain drain, where many professionals have left for places like Singapore, Australia, and New Zealand. He highlighted the growing number of Malaysians who commute to Singapore to perform manual labour, simply because the wages are better.

“If Malaysia fails to transform its economic structure, we risk becoming a net exporter of labour rather than talent. One day, our children could end up working as domestic helpers abroad — and I wouldn’t be surprised if it happens,” the Tan Sri warned.

With how stagnant Malaysia’s wage growth has become. Tan Sri Ibrahim says that the B40 income group may soon encompass up to 60% of the population. He warns that gross domestic product (GDP) figures can be misleading as it does not show the economy’ job structure, the type of industries that Malaysia is creating, or the number of high-value jobs being generated.

He does however emphasise that Malaysia can reform, citing many other Asian nations such as Japan, South Korea, and China, who once were once behind Malaysia in per capita income, but has since grown far ahead after decades of targeted growth.