Malaysia's minimum wage policy highlights limits in improving living standards

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Malaysia minimum wage limits

Highlights

Malaysia's government has set a minimum wage of RM2,000 from June 2025, but companies with revenue below RM50 million are exempt, creating a two-tier system.
Only graduates and semi-skilled workers will receive a minimum wage of RM2,500 from June 2025, still well below the formal-sector median wage of RM3,000.
The new minimum wage rates are expected to be easier to meet in developed states, but will increase operating cost pressures in lower-income states and could reduce job opportunities for younger and older workers.

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

Implementing two minimum wage rates

As outlined by The Edge Malaysia, the current minimum wage policy and proposed new rates highlight the gap between the goal of protecting workers and the reality of employer costs across the country. The government has set a minimum wage of RM2,000 from June next year, but businesses with annual revenue of less than RM50 million are exempt, creating a two-tier system until the rate is standardised.

In practice, this means some workers, such as cleaners, lorry drivers and casual workers, may continue to earn RM1,700 a month under the new rules. Data from the Department of Statistics Malaysia shows that about seven million of the 16.8 million people in the labour force earned less than RM2,000 a month as of March this year, and many of them are likely to work for companies not subject to the RM2,000 minimum rate.

For graduates and semi-skilled workers, the government says a minimum rate of RM2,500 a month will also take effect from June next year. However, this remains below the national median monthly wage for formal workers of RM3,000 as of June this year, suggesting that such pay levels may be easier to meet in developed states than in lower-income states such as Kelantan, Kedah and Perlis.

Cost pressures, hiring and social welfare

Companies in Kuala Lumpur, Johor, Penang and Selangor are seen as better able to afford the minimum rate for graduates and semi-skilled workers, but the situation may not be the same in poorer states. In addition to basic wages, employers must also account for Employees Provident Fund contributions and medical benefits, making minimum wage-setting subject to broader commercial considerations.

Investment, Trade and Industry Minister Datuk Johari Abdul Ghani previously told Parliament that some companies pay the same minimum wage to foreign workers and local workers with vocational training, even though foreign workers also receive accommodation and transport to work. This highlights that differences in actual welfare depend not only on wage rates but also on the cost of living, housing and transport borne by local workers.

Employers generally still tend to hire local workers for semi-skilled and skilled roles because the process is easier, but workforce retention and competition for workers remain challenges. In this context, minimum wage policy alone is not considered sufficient to address social welfare issues, since workers’ living standards also depend on public housing support, healthcare, education and other social benefits, alongside the risk that higher minimum rates could affect job opportunities for younger and older workers.

In a previous article, we explained how investment is now assessed through job quality, including fair wages and safe workplaces, as part of the quality investment framework.

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