Act 1 · The symptom
Are Malaysian wages actually low?
My pay is too low.
Is that just a feeling? Here are four ways to check.
Of every RM1 Malaysia's economy produces, how many sen are paid to employees?
Drag the slice on the coin, or use the slider. Then reveal.
Paid to employees, per 100 of GDP, 2024
Malaysia pays the smallest share of the seven: 33.6 sen of every ringgit. Germany pays 54.7 cents of every euro. The government's target is 40% by 2030, which needs about one percentage point a year.1:06:02
Source: Bank Negara Malaysia, Economic and Monetary Review 2025, Chart 18, p. 68 (PDF), from the Ministry of Finance's Economic Outlook 2026. Target: Ministry of Economy statement (RTM).
Data and notes
Editor's note. This counts employees only. About 20% of workers are self-employed, and their earnings are recorded separately as "mixed income", so the labour share understates what all workers earn (Bank Negara, p. 67).
Two ways pay can grow. A bigger slice: employees get a larger share of what is produced (Fig. 1). A bigger pie: each worker produces more (Act 2). Lasting pay rises need one or both.
Real pay grew slowest in Malaysia
Real wage index (after inflation), 2010 = 100. Where each country had got to by 2021.
Over 2010 to 2021, real wages rose 22% in Malaysia, 32% to 38% in Indonesia, Vietnam and Thailand, and 127% in China. Malaysian wages also fell furthest during COVID. A decade of leaving wages to employers and the market did not close the gap, so the episode concludes the government has to step in.1:08:03
Source: Ministry of Economy, Kertas Putih Cadangan Dasar Gaji Progresif (2023), Carta 6, p. 8 (PDF). Original data: Bank Negara Malaysia and DOSM.
Data and notes
Editor's note. Each country's index is in its own currency, so this compares growth, not pay levels.
Private-sector pay has fallen behind prices
Index, 4Q 2019 = 100, at 4Q 2025 (approximate). Blue is prices, red is pay. Pay is in current ringgit.
If pay grows more slowly than prices, it buys less. Private-sector pay rose less than prices overall, and well behind food. Recent government pay rises went to civil servants, while most workers are in the private sector. That is why households feel worse off even when GDP growth looks healthy.1:10:32
Source: Bank Negara Malaysia, Economic and Monetary Review 2025, Chart 19, p. 69 (PDF). Values are read from a chart without data labels, so they are approximate.
Data
At no age does median pay go above RM3,500
Median monthly pay by age group, Q1 2023. Half of each age group earns less than this.
Pay climbs to a median of RM3,500 at ages 40 to 49, then falls. Against this, a starting salary of RM5,000 to RM6,000 is high, not low.1:15:00
Source: Ministry of Economy, Kertas Putih Cadangan Dasar Gaji Progresif (2023), Carta 4, p. 6 (PDF). Original data: DOSM.
Data
Act 2 · The usual suspect
Are employers pocketing the gains?
Productivity keeps rising, so employers are pocketing the gains.
Check what workers produce, and how much of it reaches their pay.
Since 2019, productivity rose while private-sector real pay fell
Total change from 2019 to 2025.
From 2019 to 2025, productivity rose 9% in total. Private-sector pay per worker, after inflation, fell 1.7%. On this measure, workers did not share in the gains.1:36:33
Source: Bank Negara Malaysia, Economic and Monetary Review 2025, p. 21 (PDF).
Notes
Editor's note. The episode put cumulative pay growth at "around 2%". Bank Negara's figure for private-sector real pay per worker is a 1.7% fall.
The typical worker's real pay took until 2024 to catch up
Real output per worker and real median wage, index 2019 = 100.
COVID cut pay (to 86) more than output per worker (to 95). Output per worker was back above its 2019 level by 2022. The median wage only caught up in 2024, when both reached 105. This series covers all workers, including the public sector, whose pay rose faster, so it looks better than Fig. 5. Both can be true.54:32
Source: Bank Negara Malaysia, Economic and Monetary Review 2025, Chart 17, p. 68 (PDF). Only the points labelled in the source chart are plotted.
Data
Most firms produce far less per worker than the average suggests
Value added per employed person, 2024, RM a year at 2015 prices. Each block is RM10,000.
The often-quoted RM99,265 per worker is an average. Large firms produce RM117,105 per worker; MSMEs, RM80,507. What big firms can pay says little about the typical employer. And output per worker grew just 2.4% in 2024 and 0.7% in 2023, which employers cite against large raises.1:00:35
Source: DOSM, Micro, Small and Medium Enterprises 2024, Chart 5, p. 16 (PDF).
Data and notes
Editor's note. "I create RM99,000 a year, about RM8,000 a month, but earn RM2,000" overstates the gap. Value added is in 2015 prices while pay is in today's money. It counts owners and the self-employed too, and it must also cover equipment, rent, interest, taxes and profit.
Why GDP grows faster than productivity
The episode says big export firms grow sales without hiring. But output that grows without extra workers is productivity growth. In 2024, most of the gap was simply more people in work.
2024
Made of
Sources: DOSM, MSMEs 2024: GDP growth, p. 2 (PDF); employment rose from 16.20 million to 16.63 million, p. 15 (PDF); output per worker, p. 16. The sum is approximate because growth rates multiply (1.024 × 1.026 = 1.051).
Act 3 · The popular fix
Why won't a higher minimum wage lift everyone?
Raise the minimum wage by RM300 and everyone gets RM300 more.
Predict first, then try it.
A cleaner earns the minimum wage, RM1,700. A fresh graduate earns RM2,500. The minimum wage rises to RM2,000. What happens to the graduate's pay?
If every wage rose by the same amount
Gap:
What usually happens: wage compression
Gap:
This is the episode's own example. The law forces a raise at the floor, but nothing forces raises above it. If the firm's revenue hasn't grown, it holds back the next rung up. At a RM2,000 floor the gap falls from RM800 to RM500. At RM2,500 it vanishes, and a degree earns nothing extra.1:24:002:28:00
An illustration, not data. Minimum wage of RM1,700 since February 2025: Bank Negara Malaysia, p. 21 (PDF).
The rungs have moved closer together
How much more the median semi-skilled worker earns than the median low-skilled worker, RM a month. Each mini-ladder is one year: red rung = low-skilled pay, blue rung = semi-skilled pay.
The extra pay for semi-skilled work fell from RM550 in 2016 to RM182 in 2022. Bank Negara puts it at RM396 in 2024, still well below 2016. With so little extra pay, a diploma or vocational training (TVET) is harder to justify. Many low-skilled workers are foreign.1:22:40
Source: Ministry of Economy, Kertas Putih Cadangan Dasar Gaji Progresif (2023), Carta 5, p. 7 (PDF). 2024: Bank Negara Malaysia, Economic and Monetary Review 2025, Chart 23, pp. 71–72 (PDF).
Data
Where the pay piles up
Malaysia's 6.45 million formal-sector employees as 100 people, by monthly pay, March 2023.
Picture Malaysia's 6.45 million formal-sector employees as 100 people. Each figure stands for about 64,500 employees.
Line them up by monthly pay, lowest at the bottom. Each row is a pay band.
A quarter of them, 25 people, are paid RM1,500 to RM1,999, just above the minimum wage at the time. It is by far the biggest row.
Nine of those were paid exactly RM1,500, the minimum wage: about 570,000 people.
Another ten were paid less than the minimum wage: about 658,000 people.
Half of the 100 were paid less than RM2,600, the median. Most of the crowd stands within about RM1,000 of the floor.
Type your pay into the payslip at the top to see where you'd stand.
When so many people are paid at or just above the floor, raising it moves a big crowd, and the next rungs up get squeezed. A gentler slope would mean more people moving up the ladder.1:25:00
Source: Ministry of Economy, Kertas Putih Cadangan Dasar Gaji Progresif (2023), Carta 7, p. 9 (PDF). Original data: DOSM. The same chart marks the median (RM2,600), the 2022 poverty line (RM2,589) and the living wage (RM3,047).
Data and notes
Editor's note. The 25 pay bands in the source are grouped into eight rows here, and the figures are rounded so they add up to exactly 100. The top bands are much wider than the RM500 bands lower down, so compare rows by their pay ranges.
If small firms are exempt, firms employing almost half the workforce are left out
A recent ministerial statement said MSMEs would be exempt from the next increase. Each square is 1% of all employed people (16.63 million).2:25:32
The raise would then reach mainly low-paid staff in large firms and in government. Many large firms, including government-linked companies, already pay above the likely new floor.2:27:01
Source: DOSM, Micro, Small and Medium Enterprises 2024, p. 14 (PDF).
Notes
Editor's note. The 8.10 million includes owners, the self-employed and staff already paid well above the minimum, so fewer workers would directly miss a raise.
Act 4 · The root cause
What really holds wages down?
Wages are low because employers are greedy.
Most employers would pay more if they earned more, because better pay keeps better staff. The constraint is how little value most firms create, and a cycle that keeps it that way.1:58:33
The low-wage line: five stations, no exit
The episode's argument, drawn as a circle line.
Two kinds of factory
The type of firm matters because of spillovers: low-value work creates little demand for skilled jobs elsewhere.2:03:02
Low-value factory
- Hundreds of foreign workers on manual assembly
- Raw materials imported
- Little local spending beyond cheap food and housing
High-precision manufacturer
- Fewer staff, more machines
- Buys chemicals, engineering and automation services locally
- Creates skilled, better-paid jobs along its supply chain
Foreign worker numbers have rebounded since COVID, by the episode's figures
Millions. Stated in the episode; no published source found. 2025 is an estimate.
Foreign workers are concentrated at the bottom of the pay ladder, so the episode argues they would gain most from a higher minimum wage. The government has recently moved to speed up foreign-worker intake.2:06:00
Data and notes
Editor's note. No official series matching these figures was found. Official counts depend on the definition used (for example, holders of temporary work passes), so treat this chart as indicative.
Act 5 · The way out
What would break the loop?
Leaving wages to the market hasn't worked. But any fix must also work for the typical small employer.
Play a policy card to see which stretch of the line it works on.1:41:31
Green marks the stations each option works on. The mapping is an editorial summary of the episode's argument.
How the Progressive Wage Policy is meant to work
- Raise pay along the whole ladder, including the floor.
- Give SMEs temporary wage support.
- In return, workers upskill.
- Review productivity after two years.
- Support ends. A firm that cuts pay loses staff, so higher pay sticks.
Each figure = 50,000 workers.
Today the scheme gets about RM50m a year, reaches about 50,000 workers, and runs out in 2027. The original request was about RM2bn over about four years, for 2 million or more workers. That is about a quarter of private-sector workers, enough to shift pay levels economy-wide.2:29:31
Notes
Editor's note. Funding and coverage figures are stated in the episode; no published source was found. Both work out to about RM1,000 per worker (RM50m ÷ 50,000; RM2bn ÷ 2 million). One is per year and the other a four-year total, and the episode does not say how long each worker is supported, so the costs are not directly comparable.
What to watch in the Budget
- Are MSMEs exempt from the minimum-wage increase? If so, firms employing almost half of all workers are outside its reach (Fig. 11).
- Is there new money for the Progressive Wage Policy? Without it, the scheme cannot take new workers. The episode expects none.
- Does foreign-labour policy change? A levy that funds automation works on the first stations of the line; faster intake feeds it.
- Does help reach private-sector workers? Their pay has lagged prices the most (Fig. 3).
Longer term: an ageing workforce
Fewer young workers will replace those who retire. Filling the gap with foreign labour keeps the same drag on wages.2:16:02
Longer term: AI and skills
AI mainly replaces entry-level office work, such as bookkeeping. Demand grows in care, food service and construction, so education and training need to shift.2:18:31
Three things to remember
Employees get 33.6% of GDP, and output per worker grew just 2.4% in 2024.
Raising only the minimum wage bunches pay together instead of lifting everyone.
Cheap labour holds back automation. Fixes that make automation pay, and lift the whole ladder, go to the root.
Quick check
1. Of every RM1 the economy produces, how much is paid to employees?
2. The minimum wage rises by RM300. What usually happens just above the floor?
3. Which option works on the first stations of the low-wage line?
The paper trail
| Document | Used for |
|---|---|
| Bank Negara Malaysia, Economic and Monetary Review 2025 | Figs. 1, 3, 5 and 6; the 2024 skill gap in Fig. 9; the minimum wage; cash aid |
| DOSM, Micro, Small and Medium Enterprises 2024 | Figs. 7, 8 and 11 |
| Ministry of Economy, Kertas Putih Cadangan Dasar Gaji Progresif (2023) | Figs. 2, 4, 9 and 10; the payslip |
| World Bank, Malaysia Economic Monitor, April 2026 | Frontier firms (Fig. 12, station 2) |
- Page numbers are those printed in each document. PDF links open at that page.
- Stated in the episode, no published source found: foreign-worker counts; Progressive Wage Policy funding and coverage; that about 97.5% of roughly 1.1 million businesses are MSMEs.
- The argument is summarised from the episode's auto-generated transcript. Notes marked "Editor's note" and "Fact check" are added checks, not part of the episode.
Terms
- Median
- The middle value when everyone is ranked. Less affected by a few very high earners than the average.
- Real wage
- Pay adjusted for inflation: what it can actually buy.
- Index (2019 = 100)
- A way to show change. 105 means 5% above the base year.
- Value added
- Sales minus materials and services bought from other firms: the value a business creates with its workers and equipment.
- Productivity
- Value added per worker (or per hour worked). Also called output per worker.
- Labour share
- Compensation of employees (pay, bonuses, employer contributions) as a share of GDP.
- MSMEs
- Micro, small and medium enterprises (PMKS). Services: up to 75 full-time staff or RM20m in annual sales. Manufacturing: up to 200 staff or RM50m.
- Wage compression
- Pay levels bunching together, so extra skill or experience earns little more.
- Progressive Wage Policy
- Dasar Gaji Progresif: wage incentives for firms, tied to worker upskilling.