PETALING JAYA: While Malaysia’s labour market has remained stable, economists have raised concerns of potential structural underemployment issues within the country.
According to the Statistics Department, Malaysia’s total employment reached a record 9.16 million jobs in the third quarter of 2025, a 1.7% increase from the same period last year.
The number of employed persons rose by 0.7% quarter-on-quarter and 3.1% year-on-year.
Meanwhile, the unemployment rate remained at 3% in September, the sixth straight month of no change.
While this is all well and good, Williams Business Consultancy Sdn Bhd founder and economist, Geoffrey Williams, noted that the unemployment rate and the number of people unemployed are not always key indicators.
“The unemployment rate is at normal levels around 3% and although the number of unemployed people has fallen, they appear to be taking low-paid jobs.
“There is a structural underemployment problem. In the third quarter of 2025, skill-related underemployment – graduates and diploma holders in low – or semi-skilled jobs – rose slightly to 1.96 million, making up about 35.5% of employed degree and diploma holders,” he told StarBiz.
Williams Business Consultancy Sdn Bhd founder and economist, Geoffrey Williams
As such, Williams said that there are more than 2.5 million unemployed or underemployed individuals by skills, noting that this accounted for 28.6% of the labour force.
“This pushes down wages,” he said.
According to Williams, the median wage was RM3,064 in January, compared to RM2,864 in June.
“This is a fall of RM200 or down 6.5%. In fact, it is a trend.
“There has been a decline over the last six months and it’s about where it was in March last year.
“Due to inflation, this lower income buys less in the shops and so, most people are worse off now than they were in March 2024.”
According to Williams, around 30% of individuals are earning less than RM2,000 per month, while 20% are earning less than the minimum wage.
“This is only for individuals under formal employment. It is likely that there will be a continuous increase in employed individuals because the cost of living is forcing people to work, especially young people.
“They take low salaried jobs and this pushes down median wages.”
Williams added that there is also an increase in “own account workers” or self-employed, micro-enterprises and gig-economy workers.
“We do not know their salaries but it is likely that they are better than formal contracts; otherwise, people would not choose this line of work.”
Williams said all of these point to labour market stress and “not a successful labour market.”
“In 2026, we will see the minimum wage increase, the progressive wage and the gig-economy bill all impacting employment and wages positively.”
Analysing the latest (third quarter of 2025) labour statistics, Centre for Market Education chief executive officer Carmelo Ferlito said “the real issue is more on underemployment, rather than unemployment.”
“This is due to a perception that has been created that everybody should get a degree (so the quality of degree has declined), ignoring that the job pyramid is indeed a pyramid.”
Commenting on the country’s labour market performance so far this year, Ferlito said it has been within expectations.
“Unemployment has been pretty stable, declining to 3%, the lowest level since a decade. I think this had to be expected as the internal dynamics of the Malaysian economy did not change.
“It is reasonable not to expect major changes for the next year, but the effect of the ongoing trade-tensions on export-driven sectors should be monitored.”
Centre for Market Education CEO Carmelo FerlitoMeanwhile, Kenanga Research in a recent report said Malaysia’s labour market remains firm despite ongoing global headwinds.
The research house said its outlook is supported by strong domestic-oriented sectors, sustained services expansion, a mining recovery and national policy frameworks that continue to attract high-quality, job-creating investment.
“We expect services to continue to lead job creation, helped by the momentum from the Visit Malaysia 2026 campaign.
“Measures outlined in the Federal Budget 2026 should also further support hiring across various industries.”
TA Securities believes Malaysia’s labour market is expected to remain resilient in the coming months, supported by steady economic growth, rising labour demand and continued recovery in key sectors such as services and manufacturing.
“Overall, the labour market is on a firm upward trajectory and could record its strongest performance in over a decade.
“The unemployment rate is projected to ease to around 2.9% by end-2025, assuming current positive momentum persists.
“For the year as a whole, we maintain our forecast for the unemployment rate to average at 3%, with potential improvement to 2.8%–3% in 2026 as employment conditions strengthen further.”
The research house noted also that the Finance Ministry projects the jobless rate to remain at 3% next year, reflecting expectations of sustaining labour market stability.
Hong Leong Investment Bank Research meanwhile said it expects the stable job market conditions to drive domestic consumption and economic growth, underpinned by employment and wage growth, as well as income-related policy measures.
“In addition, easing global policy uncertainty following the US Senate’s move toward government reopening could further support external demand.
“As such, we maintain our expectation for Bank Negara Malaysia to hold the overnight policy rate at 2.75% until the end of 2026.”
