Malaysia’s minimum wage policy has helped to close the income gap between entry-level workers with different education levels over the past decade, according to new findings from the PNB Research Institute.

The institute’s study indicates that those with lower academic qualifications, particularly PMR and SPM holders, recorded markedly higher real wage growth following the introduction of the minimum wage in 2012. Although graduates continue to earn more, their wage growth has been significantly slower, which has in turn reduced the wage premium traditionally associated with higher education.

The research, based on 26 years of data from the MEF Salary Survey spanning from 1997 to 2022, is among the first in Malaysia to assess long-term trends in private-sector wages. According to the institute, the real median monthly salary for entry-level PMR graduates rose by 64% in the decade after the minimum wage was introduced, compared to just 19% in the preceding ten years. SPM holders saw their real wage growth improve to 37%, up from 10% over the same periods.

In comparison, degree holders experienced minimal gains, with real wage growth peaking at 5%, and in some cases, declining by as much as 3%. Those holding master’s degrees fared worse, with wage growth reversing from 4% to a 10% contraction.

The earnings gap between degree and SPM holders has also narrowed considerably. In 1997, degree holders earned 167% more than those with SPM qualifications. This figure dropped to 128% in 2012, and by 2022, the premium had declined to just 67%.

The study also found that holders of TVET diplomas enjoyed stronger wage growth than those with academic diplomas over the past decade. Real wages for TVET diploma holders rose by 14%, compared to only 2% for their academic counterparts. In 2012, TVET diploma holders earned RM1,300, while academic diploma holders earned RM1,500. A decade later, their salaries had risen to RM1,800 and RM1,850 respectively.

While the minimum wage policy has contributed to reducing wage disparities, it has also weakened the financial advantage typically associated with obtaining higher academic qualifications. 

As a corrective measure, PNB Research recommends supplementing the minimum wage framework with broader structural reforms, such as a living wage and a progressive wage policy, to support sustainable income growth.

The institute also emphasises the importance of enhancing wage bargaining systems, advocating for more centralised and institutionalised mechanisms between employers and employees. It suggests that the government should play a proactive role in supporting both parties to engage in fair and effective wage negotiations.

(Source: The Edge)

• TAGS:
• MEF Salary Survey
• Minimum Wage Policy
• PNB Research Institute
• Wage Growth
• Wages