The call to link wage reform to productivity once again assumes that Malaysian workers have yet to earn higher wages through their contribution to the economy. The evidence suggests otherwise. Parti Sosialis Malaysia (PSM) argues that such recurring arguments that wages must wait for higher productivity puts the cart before the horse.
At an event titled “Navigating External Uncertainties, Strengthening Resilience” during 9th June 2026, Economy Minister Akmal Nasir said that while higher wages are necessary, “a bigger issue we need to address is productivity. Better wages must mean better productivity.” [1] Touting Progressive Wage Policy (PWP) as solution once again, Akmal added that whether workers “like it or not”, the PWP’s buy-in from companies and industries are vital because “the effort of addressing wages involves the government and private sectors.”
This is precisely why workers are increasingly skeptical whenever employers demand “more productivity first” before any wage increments. The question is: productivity for whom? Almost everyday, incessantly, Malaysian workers have been told that higher wages must wait for higher productivity. The evidences, however, suggest that labour productivity in Malaysia has risen steadily over the years, while worker compensation has lagged behind.
According to data from the Department of Statistics Malaysia (DOSM), 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. It came in higher than the growth of 1.4% in the fourth quarter of 2024 (4Q2024), amounting to RM44.20 per hour. [2]
Sectorally, labour productivity saw growth across most sectors in 3Q2025 and 4Q2025. [3] Construction led the growth at 10.3% for the quarter versus 10.2% and 9.3% in the preceding quarters respectively. Manufacturing, agriculture and services sectors recorded 6.5%, 5.6% and 4% labour productivity growth during 4Q2025, with the only exception being the mining sector, whose productivity dropped from 9.2% to 4.2% in the same quarter. [4] Meanwhile, labour productivity per employment rose, amounting to RM26,765 per person in 4Q2025, compared to RM24,866.10 per person in 1Q2025.
Data from Khazanah Research Institute also reveals that labour productivity has increased by “almost two-and-a-half-fold”, across three decades, from 1985 to 2016. 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.” [5] The services and agricultural sector increased by about two-and-a-half times and two times respectively during the same period. More evidence comes from Bank Negara Malaysia, whom concurred that “wages caught up with the cumulative productivity gains only in 2024” when indexed to 2019 levels. [6]
Anchor the above information with the following: according to Ministry of Finance, the Malaysian economy grew 5.2% in 2024 and 2025, and “exceeded expectations for a second consecutive quarter” by growing 5.4% for the first quarter of 2026 (Q12026) [7]. Increase in labour productivity levels across various sectors between Q32025 and Q42025 were also complemented by increase in Gross Domestic Product (GDP) across those sectors. Services sector’s GDP grew from 5.3% in Q32025 to 6.2% in Q42025; during the same period, manufacturing sector’s GDP grew from 4.1% to 6.0%, while agricultural sector’s GDP grew from 0.2% to 5.7% [8]. So, labour productivity grew, and GDP grew and “exceeded expectations”, therefore what are we missing?
Here’s where the figures in Compensation of Employees (CE) in GDP comes in. CE measures the compensation paid to workers for their labour, through wages, salaries, bonuses, commissions, paid time off, and incentives. Seen through GDP, CE can be viewed as how much of the wealth accrued actually was channelled into compensating the employees. Bank Negara Malaysia has long highlighted that CE in Malaysia “remain stagnated at a little over one-third of the economy” compared to other countries, such as UK (49.8% of GDP), US (51.9% of GDP) and Germany (54.7% of GDP).[9] In 2024, CE comprised 33.6% of the GDP, growing from 33.5% of GDP in 2023 [10] ; both notably well off the Madani government’s Thirteenth Malaysia Plan’s target ratio of 40% by 2030.
However, direr observation emerges when we look beyond the headline 33.6% CE share of GDP, and dive deeper into the sectoral CE share of GDP. Manufacturing and services sectors’ CE share of GDP only stood at 2.2% and 5.5% respectively, accruing less than one-sixth of the cumulative CE share of national GDP. The two biggest contributors to CE share of GPD were instead mining and construction sectors, at 14.2% and 18.0% [11]. The above is all the more appalling because manufacturing and services sectors employ nearly four-fifths the labour force: in 2024, the services sector led with the largest share of 51.9% (4.70 million) of total jobs while manufacturing sector placed second at 27.7% (2.50 million) [12]. This means 79.6% of total jobs created in 2024 only contributed less than one-sixth of CE share of GDP. Mining and construction sectors, which contributed 14.2% and 18.0% CE share, only comprised 0.9% (80,000) and 14.0% (1.27 million) of total jobs created. [13]
Therefore, three distinct observations emerge: firstly, the labour productivity levels have increased, seen in the last quarter or the last thirty years, across most sectors. Secondly, the GDP has increased year-on-year and “exceeded expectations”, even across the two important sectors, manufacturing and services. Thirdly, the CE share of those two sectors which employ nearly four-fifths of Malaysian labour force only coughed out 2.2% and 5.5% of their GDP back to their workers. In the midst of this, Malaysian workers have become poorer, literally. According to BNM deputy governor, “real wages have declined despite gains in productivity.” [14] Between the first quarter of 2020 (Q12020) to first quarter of 2025 (Q12025), the consumer price index (CPI) rose by 9.8%, while food and beverage prices surged by 17.5%. The BNM deputy governor reported that “nominal wages in the private sector grew by only 7.9% over the same period — resulting in a real wage decline of 1.9%.” Graduates meanwhile faced a precipitous drop in median starting salaries, from RM2,112 in 2018 to RM1,747 in 2023, with “many entering the labour market at near-minimum wage levels.” When zoomed out for historical context, another former BNM governor also concurs that Malaysian’s real wages “have declined nearly threefold over the past four decades.” [15]
Consider again our country, whereby almost 80% of the labour force works in two sectors whose compensation to employees barely reaches one-sixth of GDP. The fundamental question Akmal Nasir should be is: if rising productivity does not lead to rising wages, how much more productivity must workers deliver before they qualify for a decent standard of living? According to recent estimates, 80% of Malaysians “lived from paycheck to paycheck” spending almost all monthly income on “daily expenses, leaving little or nothing for savings.” [16] The Minimum Wage Order 2024 only just raised the formal wage floor to RM1,700 around August 2025, when Bank Negara, since 2018, has been championing for RM2,700 and RM4,500 living wages for single adult and couple (without child) living in KL respectively. [17]
This is why continuously conditioning wage increases on future productivity becomes a moving goalpost. The Progressive Wage Policy (PWP), which the preceding Economic Minister Rafizi touted and the current Economic Minister Akmal Nasir has championed, once again anchors the minute wage gains upon increasing productivity, ostensibly through training and upskilling courses, without a fundamental regard to the fact that productivity has risen, but it is the wages that lagged behind. Even worse, PWP operates on a voluntary basis, meaning employers have the option to opt-out. If the government is this unserious about raising wages for workers, so much so that the landmark policy being touted by Economic Minister remains voluntary, how can the workers trust the Madani government’s efforts in being “more compassionate towards workers”? [18]
Workers increase productivity. Wages lag behind. Then workers are told productivity must increase again before wages can rise. The fundamental issue therefore is not whether productivity matters. Workers, through increasing labour productivity across the last three decades, have already demonstrated that productivity matters to them too. Rather, the issue remains who captures the gains when productivity rises.
A serious wage reform agenda shouldn’t begin by telling the workers to further increase their productivity levels, or buy into PWP as a solution whether workers “like it or not.”[19] PSM recognises that actual, meaningful wage reform should begin by recognising that Malaysian workers have already generated significant productivity growth. The challenge now is ensuring that the benefits of that growth are shared more fairly instead of being perpetually deferred to some future productivity target that never seems to arrive.
Thulasidasan Jeewaratinam
Worker’s Bureau
Parti Sosialis Malaysia
[1] Tham, L. (2026, June 9). Wage reform needs industry buy-in, productivity link, says economy minister. FMT. https://www.freemalaysiatoday.com/category/nation/2026/06/09/wage-reform-needs-industry-buy-in-productivity-link-says-economy-minister
[2] Labour Productivity. OpenDOSM. https://open.dosm.gov.my/dashboard/labour-productivity
[3] Lee, E. (2025, March 5). Cover Story: Closing the gap between productivity and wages. The Edge. https://theedgemalaysia.com/node/793838
[4] Labour Productivity. OpenDOSM. https://open.dosm.gov.my/dashboard/labour-productivity
[5] 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
[6] Amin, L. (2026, March 31). Malaysia’s wage growth lags productivity, more reforms needed, says BNM. The Edge. https://theedgemalaysia.com/node/798036
[7] MOF. (2026, May 15). Press Release: Malaysia’s Economy Grows 5.4% In Q1 2026, Outpacing Expectations Amid Global Uncertainty. https://mof.gov.my/portal/en/news/press-release/malaysias-economy-grows-5-4-in-q1-2026-outpacing-expectations-amid-global-uncertainty
[8] Gross Domestic Product. OpenDOSM. https://open.dosm.gov.my/dashboard/gdp
[9] Amin, 2026.
[10] Ministry of Economy. (2025, July 30). Gross Domestic Product Income Approach. https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-income-approach-2024
[11] Ibid.
[12] Ministry of Economy. (2025 February 13). Employment Statistics, Fourth Quarter 2024. https://www.dosm.gov.my/portal-main/release-content/employment-statistics-fourth-quarter-2024
[13] Ibid.
[14] Amin, L., & Qing, Y. Y. (2025, June 17). Experts call for urgent labour reforms as Malaysian real wages decline. The Edge. https://theedgemalaysia.com/node/759261
[15] Malaysia’s real wages down threefold in 40 years, says former BNM governor. (2025, May 4). New Straits Times. https://www.nst.com.my/news/nation/2025/05/1211265/malaysias-real-wages-down-threefold-40-years-says-former-bnm-governor?sfnsn=wa
[16] Husin, M. M. (2026, June 9). 70pct of Malaysian workers earn RM5,000 and below. New Straits Times.
[17] Chong, E., & Khong, F. A. (2018, March). The Living Wage: Beyond Making Ends Meet. Bank Negara Malaysia, Monetary Policy Department.
[18] PM urges employers to be more compassionate towards workers. (2026, May 1). FMT. https://www.freemalaysiatoday.com/category/nation/2026/05/01/pm-urges-employers-to-be-more-compassionate-towards-workers
[19] Tham, 2026.