RM2,500 minimum wage proposal could boost incomes for semi-skilled workers in Malaysia

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RM2,500 minimum wage proposal

Highlights

The proposed RM2,500 minimum wage exceeds the 2025 median wage of RM2,223 for semi-skilled workers, affecting 55.6% of jobs and nearly 30% of degree holders.
A uniform minimum wage increase is expected to deliver a cost shock to businesses in states outside the economic hubs, while urban employers are less affected because their existing pay rates are higher.
The minimum wage measure could lead to wage compression, higher labor costs, hiring constraints and rising inflation if costs are passed on to consumers.

This article was translated from the original. Read the original version by our correspondent here.

Scope of the proposal and workers affected

As reported by The Edge Malaysia, Department of Statistics Malaysia data shows that the median monthly wage for semi-skilled workers was RM2,223 in 2025, while Ministry of Higher Education data shows that nearly 30% of degree holders earned less than RM2,500 last year.

In a report dated Oct 14, RHB Research said semi-skilled workers accounted for 55.6% of total employment in 2025, with several occupational groups still recording median wages below the proposed threshold. These groups include service and sales workers, plant and machine operators and assemblers, craft and related trades workers, and skilled agricultural, forestry, livestock and fisheries workers.

These jobs are concentrated in the wholesale and retail trade, accommodation and food services, manufacturing, construction and agriculture sectors. CGS International Securities chief economist Ahmad Nazmi Idrus said low wages had long been a problem in Malaysia and that a firmer approach was seen as the government’s effort to encourage wage increases, although implementation was unlikely to happen immediately as it would require engagement with stakeholders.

According to Randstad Malaysia director Sueying Chan, most new graduates in knowledge-based sectors already earn more than RM2,500. She said the statutory wage floor would serve primarily as protection for graduates entering small local firms, administrative functions or non-specialist regional roles. The agency’s data shows that entry-level IT support roles can pay between RM4,500 and RM5,500 a month, while junior analysts in shared services earn RM3,000 to RM5,000.

Cost pressures and effects across regions and industries

Chan said starting salaries vary significantly between Malaysian states, reflecting differences in the cost of living, economic density and industry concentration. The Klang Valley continues to offer the highest wages, while secondary economic hubs typically pay 10% to 20% below the Klang Valley benchmark, and non-hub states can record starting salaries 20% to 40% lower.

In this context, a uniform nationwide increase may have little effect on urban employers, which typically already pay above the proposed level, but could come as a wage shock to businesses in non-hub states. Socio-Economic Research Centre executive director Lee Heng Guie said the measure could trigger wage compression as employers might have to raise wages at all levels to maintain reasonable pay gaps between new and experienced workers.

Nazmi said a flat rate nationwide could create an uneven cost burden because productivity levels differ across industries and the cost of living also varies between urban and rural areas. Lee said the resulting increase in labor costs could constrain cash flow, hiring capacity and business expansion, as well as add to inflationary pressures if some of the costs are passed on to consumers.

The risks to hiring also vary by employer size. Chan said small businesses with tight budgets might reduce entry-level hiring or choose experienced diploma holders over new graduates, while Lee said some employers might shift to more flexible workforce arrangements if profit margins narrowed.

International comparisons show that minimum wage policies can be implemented in different ways. Chan said Singapore uses a Progressive Wage Model that links wage increases to skills development, productivity and career progression, while Australia and the UK combine statutory minimum wages with industry-specific pay rates or collective bargaining agreements.

Malaysia already has a related approach through its Progressive Wage Policy, which offers incentives of RM200 to RM300 per worker to support skills-based wage progression and training. However, Nazmi said there were still implementation gaps that needed clarification, including the definition of semi-skilled workers and whether the term “graduates” also covers diploma holders. Lee stressed that a phased approach and a clearer skills-based wage structure could help businesses adapt without unduly restricting entry-level job opportunities.

In our earlier coverage of quality investment criteria for the labor market, we highlighted that investment is now assessed not only by capital, but also by job quality—including fair pay, safe workplaces and flexible work arrangements. We also discussed how these benchmarks are particularly important for increasing women’s participation in the workforce, given persistent barriers such as inadequate childcare support, even as female labor force participation reached a record high.

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