PETALING JAYA: The labour market exhibited clear signs of stabilisation in August, with the unemployment rate ticking down to 2.9% from 3% in July.
Hong Leong Investment Bank (HLIB) Research said the total number of unemployed people contracted by 1.7% month-on-month, while employment growth inched higher by 0.2%.
“Concurrently, the labour force participation rate climbed to 71%, breaking a seven-month stagnant run at 70.9%,” the research house said.
Despite these positive employment indicators, underlying shifts are visible across sectors. Social Security Organisation (Socso) data highlights an uptick in Loss of Employment cases to 7,900 in September, primarily concentrated in manufacturing, wholesale and retail trade, and construction, particularly in Selangor and Kuala Lumpur.
“Conversely, total job vacancies surged to 539,200, heavily led by manufacturing, construction, and accommodation and food service activities,” HLIB Research explained.
Looking ahead, it anticipates the healthy labour momentum to persist through 2026 and into 2027, aligning with the Finance Ministry’s 2027 unemployment target of 3%.
Consequently, HLIB Research expects Bank Negara Malaysia to maintain the overnight policy rate at 2.75% before normalising it to 3% in 2027, factoring in anticipated economic strength and mild lagged price pressures.
However, the Budget 2027 announcement raising the national minimum wage from RM1,700 to RM2,000, alongside temporary exemptions for micro, small, and medium enterprises (MSMEs), has triggered significant economic and political debate.
Opposition leader Datuk Seri Hamzah Zainudin criticised the temporary MSME exemption, warning that it creates a “two-tier workforce” and an inequality gap.
He cautioned that workers earning RM1,700 in smaller firms may migrate to larger corporations offering RM2,000, and advocated instead for a uniform minimum wage backed by targeted Socso incentives.
Economist Carmelo Ferlito offers a perspective from broader macroeconomic views, specifically if larger firms can absorb workers migrating from SMEs without a wage spiral.
“The real question is whether those higher-paying positions exist because of productivity or only because of a legislated floor. If big firms are hiring because demand is genuine, they will absorb workers without strain.
“If they are merely complying with a mandate, they will hire fewer people, automate faster or outsource,” he said.
Ferlito said thin-margin sectors like manufacturing and construction are hit hardest by an 18% jump from RM1,700 to RM2,000.
“Firms will respond predictably by cutting hours, delaying hiring, or outsourcing.
“Because the wage floor also applies to foreign labour, it raises total model costs, risking a push toward rushed mechanisation or undocumented workers.
“Hamzah is right that a two-tier system is awkward. But the more consistent fix is to let wages follow productivity, not to make the floor uniform and then subsidise it.”
Meanwhile, Sunway University economics professor Yeah Kim Leng said with unemployment at 2.9% and private-sector nominal wages growing 4.2% in the second quarter of financial year 2026, demand is deemed to be strong but not runaway to trigger a wage spiral.
“The government’s exemption for firms with annual sales below RM50mil means roughly 1.3 million MSMEs are shielded, which significantly limits the scope for economy-wide wage competition.“
However, the concern merits close monitoring, as once large firms adjust their salary structures upward to maintain internal equity, smaller firms that are not exempt or that fear losing workers to larger competitors may feel compelled to follow.
This “follow-the-leader” effect is where inflationary pressure could emerge, but it would be gradual rather than sudden.
“Fiscal channelling through Socso would require new infrastructure beyond existing systems.
“The blanket MSME exemption, by contrast, is simpler to administer but creates a cliff-edge distortion whereby firms just above the RM50mil turnover threshold face full compliance while those just below are shielded,” Yeah explained.
“Targeted Socso incentives are preferable in principle, provided the practical difficulty of designing them without creating new distortions can be overcome.”
