KUALA LUMPUR: Malaysia needs to move beyond raising the wage floor to building a more progressive wage ladder, with productivity as the foundation for sustainable wage growth over the medium and long term.
According to the Finance Ministry’s Economic Outlook 2027 report released on Friday (Oct 9), this effort requires an integrated approach encompassing firm capability enhancement, industrial transformation, skills development and better job matching.
The report said raising wages in labour-intensive industries should not be viewed solely as a labour-market objective from the supply side, but must be supported by stronger demand for skills and enhanced firm capabilities through automation and digitalisation.
"Productivity serves as the critical link between higher-value economic activities and sustainable wage progression," the report said.
The report also illustrated the ideal proportion of adjustment needed to establish a stronger and more balanced wage ladder, narrowing the wage ratio between skilled and semi-skilled workers from approximately 2.1 times in 2024 to 1.6 times, while the wage ratio between semi-skilled and low-skilled workers widens from approximately 1.2 times to 1.3 times.
It said that these adjustments would strengthen wage progression in the lower and middle segments of the wage distribution, while maintaining an appropriate wage premium based on higher levels of skills, occupational complexity and responsibility.
The report said the next phase of wage reform should focus on upgrading labour-intensive industries, particularly micro, small and medium enterprises (MSMEs), to enable firms to adopt technology, improve managerial and organisational efficiency, modernise business processes, and strengthen domestic and global market linkages.
From the labour supply perspective, skills development needs to align strategically with changes in industry demand through education, including Technical and Vocational Education and Training (TVET), reskilling and upskilling, while the Progressive Wage Policy and Academy in Industry provide useful foundations for strengthening collaboration between education and training institutions and industry.
The report also recommended giving due consideration to implementing sectoral wage floors that reflect productivity levels and wage conditions, particularly in low-paid industries, with rates not lower than the national minimum wage.
"A structured annual wage progression framework, together with wider coverage of collective agreements, could provide clearer pathways based on experience, skills, competencies, responsibilities and productivity, including industry- and occupation-specific wage ladders, it said. - Bernama
