Malaysia Raises Minimum Wage but Most Workers Still Lack Bargaining Power

Malaysia’s minimum wage would be raised from RM1,500 (US$340) per month to RM1,700 on 1 February 2025, announced Prime Minister and Finance Minister Anwar Ibrahim while presenting the 2025 federal government budget in October 2024. While the insertion of this minimum wage revision into the budget speech, the pinnacle of parliamentary proceedings, reflects the political importance of addressing low wages and slow wage growth, most workers still lack the power to negotiate salaries.

Around 4.4 million employees, or 25 per cent of the total workforce, stand to benefit from the new minimum wage. By law, the minimum wage compels employers to provide a basic livelihood for the lowest-paid workers. The record since 2013, when the mandate first took effect, shows that the wage floor has approximated the median wage of elementary workers, who perform generic, routine, and often manual jobs (Figure 1). The intervention has benefited this lowest-paid occupational group; elementary workers have enjoyed steady median wage growth and post-pandemic recovery. On the other hand, the wages of service, craft, and production workers have grown sluggishly, with some barely restored to pre-pandemic levels.

Figure 1. Malaysia: Median wages of semi-skilled and routine occupations and minimum wage levels (RM per month), 2010-2023.

These occupational wage statistics, based on published Labour Force Survey (LFS) reports, while highly aggregated, are nonetheless instructive and consistent with a 2023 report by Khazanah Research Institute (KRI), which computed wage growth by income segment from LFS raw data. KRI found that from 2010 to 2019, lower segments registered faster wage gains while the middle portions experienced slower growth.

The minimum wage has done well for wages at the bottom end, although some employers have reportedly cut allowances and benefits during past minimum wage revisions. The government should effectively enforce legal and ethical compliance.

The structure could also be enhanced by revisiting past tiered structures, based on regional or urban-rural differences, so that minimum wage corresponds more closely with the cost of living and local economic conditions. Malaysia set a two-tiered minimum wage from 2013 to 2022 but shifted to a single nationwide level — briefly in 2019, and more decisively from 2022 until today. In 2023, half of urban employees earned less than RM2,700 (the median wage); for rural employees, the threshold was RM1,600. The gulf between the highest-income and lowest-income Peninsular states reflects regional inequality: Selangor’s median wage of RM3,235 exceeds Kelantan’s RM1,750. Correspondingly, annual GDP per capita, which indicates the capacity to pay wages, ranged from RM62,500 for Selangor and RM16,800 for Kelantan.

…worker bargaining power — individually and collectively — will be decisive for sustaining wage increases.

Malaysia introduced the Progressive Wage Policy (PWP) last year for workers who earn above the minimum wage but struggle to move up the wage ladder. The PWP, piloted from July to December, institutes a scheme of wage increments corresponding with higher skills and work specifications for jobs paying between RM1,500 and RM5,000, and subsidises voluntarily participating employers to help them pay the prescribed wages. Companies must also send PWP-supported workers for training. The government has committed RM200 million to continue the PWP for 50,000 workers in 2025, but the outcomes of the pilot should be disclosed and critically analysed, especially given concerns over employers’ low uptake and uncertainty about the initiative’s long-term viability.

Malaysia’s wage growth policy has focused on promoting skills and productivity. This is a complex and arduous endeavour involving the creation of good, well-paying jobs that demand skilled labour, on which the government has sent out clear signals, notably in placing greater emphasis on quality investment.

However, worker bargaining power — individually and collectively — will be decisive for sustaining wage increases. Workers with higher qualifications and skills can individually bargain for better remuneration. On this front, though, Malaysia is struggling as mirrored in the continually sluggish growth of fresh graduates’ wages. The Ministry of Higher Education’s Graduate Tracer Study of 2023, a useful reference on fresh graduates entering the labour market, reported that 40 per cent of degree holders and 75 per cent of diploma holders earn under RM2,000. This is a strikingly large proportion, albeit a slight improvement in 2017, when 48 per cent of degree graduates and 88 per cent of diploma graduates earned under RM2,000.

Workers’ collective bargaining power derives from union membership rates and the overall strength of the labour movement. The dismal state of union participation and leadership in Malaysia is a chronic constraint. Malaysia’s private sector union membership fell from 3.9 per cent in 2010 to 2.6 per cent in 2023 (Figure 2). Public sector union membership has grown, but this does not expand collective bargaining since the government determines their employment conditions. Malaysian organised labour, chiefly the Malaysian Trades Union Congress (MTUC), is self-crippled by years of leadership strife. Their most recent debacle in January saw the general council oust their president for alleged misconduct.

Figure 2. Unionisation rates dip in the private sector — where collective bargaining matters

New windows have opened for worker representation, at least formally. Trade Union Act amendments, effective since September 2024, have widened the scope of unions and curbed the powers of the director-general of trade unions to refuse to register unions. However, the labour movement must seize the opportunity.

Minimum wage has risen in Malaysia, but for the vast majority of workers who already earn above the floor, wage growth will ride on the economy generating good jobs, employers being induced to pay more, and workers increasing their bargaining power — hurdles that remain high.

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