PETALING JAYA: The review of the RM1,700 minimum wage comes amid growing pressure over the cost of living, as the current floor remains below the poverty line and the share of national income stands at just 33.9% of gross domestic product (GDP).
While some may argue that wage increases have outpaced inflation, such a comparison does not reflect whether its workers are earning enough.
Wage gains have remained subdued despite Malaysia’s second-quarter GDP figures surprising on the upside, with the economy growing 6% year-on-year, above the advance estimate of 5.8%.
Nominal median wages rose by only 0.9% as of March 2026, while real median wages fell 0.8%. The gap is also evident when the minimum wage is compared with the poverty line.
Malaysia’s average poverty-line income stood at RM2,589 per household per month in 2024, according to the Statistics Department.
Separately, the central bank estimated in 2018 that a single person in Kuala Lumpur would need RM2,700 a month for a living wage.
Under the 12th Malaysia Plan, the government had targeted to raise the labour income share to 40% of GDP by 2025, but it was ultimately not achieved.
Labour income to GDP stood at 33.9% in 2025, up only slightly from 33.6% in 2024 and 33.5% in 2023.
This figure has remained stubbornly below the global average, staying in the low-30% range for many years.
The minimum wage review also comes as the government faces an impending general election, making wages and the cost of living particularly politically sensitive issues as voters continue to grapple with household expenses.
One analyst said the timing of the minimum wage review could also carry political considerations, given that a general election may be potentially on the horizon.
“Wages and the cost of living directly affect voters, so there is an incentive for the government to be seen as addressing these concerns,” he said.
Taken together, this suggests that an upward revision to the minimum wage is not only warranted but may also be overdue, even though a hike had been implemented last year.
But raising the wage floor also means higher costs for businesses, which may pass the cost of higher wages onto consumers, generating broader price increases.
Socio-Economic Research Centre executive director Lee Heng Guie said an increase in the minimum wage would boost workers’ purchasing power and help ease rising cost-of-living pressures, but cautioned that the review must also take into account the cost pressures facing businesses.
“Besides considering the economic indicators such as the cost of living, national median wages, the consumer price index, and general labour productivity against basic needs, the financial capacity of employers has to be considered against the decision to review the minimum wage,” he told StarBiz.
The RM1,700 minimum wage has been in force since August 2025, replacing the RM1,500 rate introduced in May 2022, which had replaced the RM1,100 minimum wage introduced in January 2019.
Lee noted that following the higher minimum wage of RM1,700 per month last year, overall consumer prices did not experience a significant, broad-based increase in inflation, though isolated cost adjustments occurred in labour-intensive retail and food-service sectors as businesses passed on higher operational expenses.
“A uniform national minimum wage cannot be one-size-fits-all.
“It needs to consider regional cost of living differences, socio-economic factors, economic and business development of different states.
“The cost of living and prices of goods and services can differ substantially between states/regions as well as the differences in the labour market conditions, with better economic and business activities and low unemployment in some states, while some states have experienced weaker business conditions with higher unemployment,” he said.
While higher wages would provide much-needed relief to workers, Centre for Market Education chief executive officer Carmelo Ferlito said raising the statutory wage floor alone may not address the underlying factors keeping wages low.
He noted that the country’s wage problem is also closely tied to productivity, the structure of its businesses and the economy’s reliance on relatively low-cost labour.
“The sustainable route toward higher wages is higher economic growth, higher productivity, capital accumulation, and more economies of scale: the challenge to higher wages is the fragmented nature of Malaysian capitalism,” he said.
Ferlito said the fragmented nature of Malaysia’s business landscape, where around 75% of enterprises are microbusinesses, limits their ability to generate sufficient productivity gains and provide stronger wage progression.
“The real point is never the starting point but wage progression – and this can be granted only when enterprises have a certain scale,” he said.
The debate over the minimum wage also comes as the country weighs the impact of higher wages on its competitiveness, given that relatively low labour costs have traditionally been one of its key attractions to investors.
A higher wage floor could put pressure on labour-intensive industries to reduce their reliance on low-cost labour, including through greater automation and productivity improvements, particularly among companies that rely heavily on foreign workers.
Nonetheless, Ferlito said low wages are increasingly concentrated in unskilled jobs, many of which are performed by foreign workers, while the scope for automation is constrained by the fragmented nature of Malaysian businesses.
“Low wages are much less a reality today than they used to be, and they are mostly limited to unskilled jobs performed by foreigners,” he said.
On the rising cost of living, Ferlito said raising the minimum wage should not be viewed as the sole solution, arguing that policymakers should instead address the underlying factors driving up the cost of housing, food, transport and other necessities.
“If housing, food, transport and other necessities are becoming more expensive, policy should address the causes of those increases rather than simply trying to compensate workers through a higher statutory wage,” he said.
