written by: Thulasidasan Jeewaratina, Workers Bureau, Parti Sosialis Malaysia (PSM)

Malaysia’s “subdued wage outcomes” are not an immutable feature of the economic order. Rather, they represent the conscious choice of an exploitative economic model which depends on the systematic underpayment of labour. Bank Negara Malaysia (BNM) points towards two trends since 2018 which accumulate towards this: firstly, a slow progress in moving towards more technology-intensive production, which contributes to a genuine lack of high-skilled, high-paying jobs.[1] Secondly, these low-value production models are aided and abetted by a heavy reliance on low-cost foreign labour, which reinforces the economic model, and “further suppresses wage growth, especially in low- and semi-skilled roles.”[2] These two trends can be corroborated when examining the increase in graduate labour force, and the corresponding creation of high-skilled jobs. Between the years 2018-2019, the labour force witnessed an increase of 226,300 graduates but only an increase of 130,400 high-skilled jobs. [3] Between the years 2021-2022, the ratio worsened as labour force witnessed an increase of 266,300 graduates but only an increase of 105,400 high-skilled jobs.[4] This meant that approximately two to three graduates were competing for every newly created high-skilled job.

The ratio has only slightly improved between the years of 2023-2024, with an increase of 219,500 graduates into work force versus an increase of 133,760 high-skilled jobs creation,[5][6] but it still points towards a persistent gap between the growth of an increasingly educated workforce and the expansion of high-skilled employment, resulting in high skills-related underemployment. According to BNM, between 2018 and 2019, nearly 33.8% of all employed persons were those with tertiary education but working in the semi-skilled and low-skilled categories. The underemployment figure then worsened to 38.4% between 2021 and 2022.[7] The figure has only slightly declined to 35% to 36% at the moment.[8] These semi-skilled and low-skilled categories encompassed 69.9% of all employment in 2025, representing roughly around 11.6 million workers, further illustrating the low-value added, low-wage economic model that Malaysia remains trapped in.[9] 

What about sectorally? In the same year, 82.3% of all employees, roughly around 13.6 million workers, worked in either one of two sectors only, manufacturing or services; the latter sector employed a whopping 66% of all employees in Malaysia.[10] These two sectors, while dominating employment and jobs creation, forked out only a cumulative 8.7% Compensation of Employees (CE) share of the total GDP of 2025.[11] The CE component represents how labour incomes are primarily assessed,[12] namely how much national economic growth actually goes to workers rather than business owners,[13] therefore warrants a closer observation. What the above means is that the salaries, bonuses and remuneration of 82.3% of all employees in Malaysia only amounted for 8.7% of CE share of GDP.[14] In comparison, employees in construction and agriculture, which only employed a cumulative 17.1% of all employees, enjoyed better salaries and remuneration, evident from their 11.4% and 6.5% of CE shares of GPD respectively. Further figures from DOSM corroborates this: nearly two-thirds of Malaysia’s wage earners were in semi- and low-skilled jobs in 2025, with median monthly wages of RM2,223 or less.[15] In comparison, the living wage figures touted by BNM for a single working adult during 2018 was RM2,700, which was seven years ago.[16] Malaysia’s low-wage economy model therefore have survived year-after-year, producing confetti-like annual GDP figures, by artificially suppressing and systematically underpaying their labour.

Why do we say artificially suppressed? Afterall, shouldn’t productivity go up first before raising wages? PSM has previously highlighted that productivity has long gone up while wages lagged behind.[17] Labour productivity, defined as value-added per hour, has consistently been on an upward trend and grew 4.9% in the fourth quarter of 2025 (4Q2025), totalling RM45.30 per hour.[18] Labour productivity per employment also rose, amounting to RM26,765 per person in 4Q2025, compared to RM24,866.10 per person in 1Q2025. Sectorally, labour productivity saw growth across most sectors in 3Q2025 and 4Q2025.[19] Manufacturing and services sectors recorded 6.5% and 4% labour productivity growth respectively during 4Q2025.[20] Even when measured across three decades, labour productivity has increased by “almost two-and-a-half-fold”; labour productivity level in 1985 was around RM28,000 per worker, measured in 2010 prices. That same worker’s labour productivity increased to RM71,000 in 2016. The two-and-a-half fold increase was buoyed by the “rise in labour productivity in the manufacturing sector, which increased by nearly three-and-a-half times between 2016 and 1985.”[21] The services and agricultural sector increased by about two-and-a-half times and two times respectively during the same period. BNM also concurred that “wages caught up with the cumulative productivity gains only in 2024” when indexed to 2019 levels.[22] What now?

One might instinctively rush to the defence of these sectors, arguing that these industries are already struggling to stay afloat and barely survive as it is. But is that really the case? The latest edition of Economic Census by DOSM, published during 2024 for the year of 2022-2023, makes a strong case against that. The value of gross output[23] for the overall economic sectors increased by 6.4% annually, amounting to RM3,851.8 billion in 2022; DOSM “predominantly attributed” this growth to the manufacturing sector, which grew its value of gross output by 7.5%.[24] This was followed by the services sector, which grew by 5.7%.[25] The total value added in the GDP for 2022 also increased by 6.2%; here too, DOSM pointed towards the services sector as the “catalyst” for the growth above, contributing to a whopping 51.9% share of the growth figures, thanks to its annual growth of 6.0%, driven by its wholesale & retail trade sub-sector.[26] The manufacturing services ranked second with a contribution of 27.6% to total value added, thanks to its 7.1% annual growth. Again, in 2025, whereby the GDP grew by 5.2%, both the services and manufacturing sectors grew by 5.4% and 4.5% respectively, with the former remaining as “the largest contributor to the economy with a 59.5% share.”[27]

So, who’s struggling to stay afloat? The manufacturing and services sectors who are termed “catalysts” for year-after-year GDP growths,[28] or the workers whom subsist with wages that have declined in real value[29] while their productivity metrics have all gone up? Workers are already forced to subsist with this artificial suppression: some take two jobs to bring home a decent wage, while others postpone major life plans such as marriage.[30] Some commute hundreds of kilometres to work to avert additional financial commitments with housing, resulting in severe physical and mental breakdown of the body.[31] One worker whom commutes from Rembau, Negeri Sembilan to Shah Alam, recalled quitting his job in 2022: “I couldn’t stand the pain in my waist and back, and I had to undergo physiotherapy because my hip bone had become stiff from sitting in the car for extended periods every day.” The worker added, “I once yelled as hard as I could inside my car because I just could not stand the stress, especially during traffic jams.” We all could relate to this. Indeed, most Malaysians are “feeling more burnt out than ever” thanks to work; the annual Employment Hero’s Wellness at Work Report reported that 67% of workers experienced burnout in 2024, up from 58% in 2022.[32] One worker, who eventually resigned after two years of mounting stress and anxiety, recalled sacrificing days off to complete assignments and respond to office-related messages, while routinely being assigned tasks beyond their job scope. The worker said: “Almost every night, I would wake up suddenly thinking about work the next day.”[33] Studs Terkel, whom wrote Working, which explores meaning, value, and emotional reality of work, had a phrase for the above: “[Work] is, above all (or beneath all) about daily humiliations. To survive the day is triumph enough for the walking wounded among the great many of us.”[34] For the ordinary Malaysians, the walking wounded among many, to be denied their rightful wage increments by the businesses and government whom reaped the fruits of their labour countless times to produce year-on-year growth figures, is a crime on its own. Underneath the hidden abode of production, we see that these confetti-like GDP figures were sustained impossibly through artificially suppressing, systematically underpaying labour.

The figures discussed above point towards several important conclusion; the two sectors, manufacturing and services, employ 82.3% of all Malaysians, have been enjoying an average 5% growth on GDP year-on-year, comprise nearly 70-80% of the GDP growth in the country, yet only cough up around 9% of CE share of GDP. Productivity figures discussed above also strengthen the economic case for higher wages. The rationale provided against raising minimum wage here is that, if these businesses were forced to increase their labour costs beyond their 9% of cumulative CE share, their Cost of Goods (COG)[35] would dramatically increase, and the final selling prices of goods would increase for ordinary Malaysians as businesses compensate the raised labour costs. This rationale operates on an underlying assumption that every increase in labour costs must be passed directly onto consumers, ipso facto. Why? Every final selling price of goods operates on a definitive profit margin, markup percentages and other arbitrary costs, which are added onto the product’s total COG per unit. Labour cost is only one component of the product’s total COG.

In reality, businesses have an array of tools at disposition to remedy the increase in cost of goods, without pre-emptively jumping the gun on raising the final selling prices. Businesses may absorb some of the increase in labour costs through lower profit margins, reduction in excessive markups, improved productivity, reduced staff turnover, reorganisation of work efficiency before raising prices. In retrospect, none of these are standard for all forms of businesses, and different operations have to scale, adapt and configure solutions, each according to their ability and each according to their needs. The important point here is that businesses do have an array of tools at disposition to offset the labour costs. We just don’t hear about them enough. This does not mean every low-wage business is necessarily highly profitable enough to sacrifice their profit margins. Some do operate on genuinely narrow margins but that does not mean low wages are economically desirable or that they should be accepted. Questions should be raised towards business operations which can only continue to exist by paying subsistence-level wages to workers. Questions should not be raised towards workers whom are justified in asking for a higher minimum wage. The evidences are aplenty and the case for higher wages is ever strong. Raising the minimum wage therefore represents a crucial first step towards confronting this systemic underpayment of labour. Afterall, if affordable goods depend on workers being too poor to afford the goods they produce, what does it say about our economic model?

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Notes:

1. Bank Negara Malaysia (2025). Sustaining the Engine: The Evolving Drivers behind Malaysia’s Private Consumption Growth. Economic and Monetary Review 2025, pg. 68
2. Ibid.
3. Bank Negara Malaysia (2023). The Case for Labour Market Reforms in Malaysia: Challenges and Opportunities. Economic and Monetary Review 2023, pg. 76
4. Ibid.
5. DOSM (2025). Graduate Statistics Report 2024, pg. 29
6. OSM (2025). Labour Force Survey Report 2024, pg. 37
7. Bank Negara Malaysia (2023). The Case for Labour Market Reforms in Malaysia: Challenges and Opportunities. Economic and Monetary Review 2023, pg. 76
8. Wage growth trails productivity, BNM calls for review. (2026, July 29). The Star. Retrieved from https://www.thestar.com.my/business/business-news/2026/07/29/wage-growth-trails-productivity-bnm-calls-for-review
9. DOSM (2026). Labour Force Survey Report 2025, pg. 35
10. Ibid.
11. DOSM (2025). Gross Domestic Product Income Approach 2024.
12. Mardiah, A. (2022, October 11). Salary increment can help Malaysia achieve high-income economy. The Malaysian Reserve. Retrieved from https://themalaysianreserve.com/2022/10/11/salary-increment-can-help-malaysia-achieve-high-income-economy/
13. Compensation of Employees (CE) refers to remuneration paid to employees as compensation for the labour services provided in the production of goods and services.
14. DOSM (2025). Gross Domestic Product Income Approach 2024.
15. Manickam, D. (2026, September 21). Nearly two-thirds of Malaysians made RM2,200 or less a month in 2025 — official data. The Edge. Retrieved from https://theedgemalaysia.com/node/818785
16. Chong, E., & Khong, F. A. (2018, March). The Living Wage: Beyond Making Ends Meet. Bank Negara Malaysia, Monetary Policy Department.
17. Thulasidasan, J. (2026, June 17). Produktiviti meningkat, gaji bila pula? Sosialis.net. Retrieved from https://sosialis.net/2026/06/17/produktiviti-meningkat-gaji-bila-pula/
18. Labour Productivity. OpenDOSM. https://open.dosm.gov.my/dashboard/labour-productivity
19. Lee, E. (2025, March 5). Cover Story: Closing the gap between productivity and wages. The Edge. https://theedgemalaysia.com/node/793838
20. Labour Productivity. OpenDOSM. https://open.dosm.gov.my/dashboard/labour-productivity
21. Ng. A, & Gen, T. Z. (2017, June 1). Productivity in Progress: Labour Productivity in Malaysia Over the Last Three Decades. Khazanah Research Institute. https://www.krinstitute.org/publications/productivity-in-progress-labour-productivity-in-malaysia-over-the-last-three-decades
22. Amin, L. (2026, March 31). Malaysia’s wage growth lags productivity, more reforms needed, says BNM. The Edge. https://theedgemalaysia.com/node/798036
23. Gross Output refers to total value of goods and services produced by all firms in an industry.
24. DOSM (2024). Economic Census 2023: All Sectors [Press Release]. Retrieved from https://www.dosm.gov.my/portal-main/release-content/economic-census–all-sectors
25. Ibid.
26. Ibid.
27. DOSM (2026). Gross Domestic Product 2025 [Press Release]. Retrieved from https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-2025
28. DOSM (2024). Economic Census 2023: All Sectors [Press Release]. Retrieved from https://www.dosm.gov.my/portal-main/release-content/economic-census–all-sectors
29. Amin, L., & Qing, Y. Y. (2025, June 17). Experts call for urgent labour reforms as Malaysian real wages decline. The Edge. Retrieved from https://theedgemalaysia.com/node/759261
30. Some workers take on two jobs, delay marriage to cope with living costs. (2025, August 4). New Straits Times. Retrieved from https://www.nst.com.my/news/nation/2025/08/1255007/some-workers-take-two-jobs-delay-marriage-cope-living-costs
31. Shah, A. (2024, February 14). Long commutes, deep sacrifices: Malaysians drive hundreds of kilometres daily for work. New Straits Times. Retrieved from https://www.nst.com.my/news/nation/2024/02/1013089/long-commutes-deep-sacrifices-malaysians-drive-hundreds-kilometres-daily
32. Malaysian workers are feeling more burnt out than ever. (2026, 20 May). Free Malaysia Today. Retrieved from https://www.freemalaysiatoday.com/category/leisure/2026/05/20/malaysian-workers-are-feeling-more-burnt-out-than-ever
33. Ibid.
34. Terkel, S. (1974). Working: People Talk About What They Do All Day and How They Feel About What They Do. Ballantine Books.
35. Cost of Goods (COG) refer to describe the direct costs of producing goods and services.