PETALING JAYA: While the minimum wage increase under Budget 2025 is seen to be a positive move especially for the young or low-skilled workers, its impact may be limited without additional support measures like stronger labour unions or targeted training programmes, say economists.
These would not only empower workers to negotiate better pay but also enhance their skills, making them more competitive in the job market and potentially leading to sustainable wage growth across various income levels.
The Statistics Department stated that the median monthly wages of the formal sector rose by 5.6% year-on-year (y-o-y) in June 2024 to register RM2,745, with the number of formal employees reaching 6.73 million persons or up 2% y-o-y.
While all age groups recorded a on-year growth in wage levels, median monthly wages for those below 20 have remained unchanged at RM1,500 since June 2022.
It noted that the bottom 10 percentile of formal employees received monthly wages of RM1,500 or less, while employees in the 90th percentile earned at least RM8,800 per month. This wage gap revealed that the highest earners (90th percentile) earn nearly six times more than those in the lowest wage group (10th percentile).
The government announced a hike in minimum wage from RM1,500 to RM1,700 a month, effective Feb 1, 2025.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid pointed out the ratio of unionised labour in the country was about 6% in 2023, trending down from about 11% in the 1980’s.
“We need to encourage the establishment of more labour unions to represent employees’ voices,” he noted in a reply to StarBiz.On the RM200 or 13% increase in minimum wage, he said it would help the labour market “to some degree”.
“The labour market is not efficient, and therefore it requires intervention by the government,” he added.
Economist Geoffrey Williams said a hike in the minimum wage would help the low-income group but it would not cascade to higher wages for other workers.
On the low median monthly wage for those under 20, Williams said youth wages are low because they have little or no power to negotiate for better pay.
“Their employers have a take-it-or-leave-it attitude because there are many people available in the job market,” he said.
Afzanizam said the low wages for this age group indicated a lack of skills and formal training.
“Young workers under 20 may not have the formal training. Therefore, their wages are low and they have low bargaining power with the employers” he added.
The Statistics Department reported that median monthly wages showed on-year growth across all economic sectors in June.
The national median monthly wage in June 2024 was RM2,745, but in Kuala Lumpur it stood at RM3,982, Selangor (RM3,000) and Penang (RM2,800). In Kelantan it was at RM1,645, Perlis (RM1,682) and Sabah (RM1,864).
