DECEMBER 13 — Recently, the Department of Statistics Malaysia (DOS) released the annual Salaries and Wages Survey Report for 2023, analysing changes in salaries among Malaysia’s labour force. The significant growth of overall wages and salaries is an encouraging sign of Malaysia’s economic recovery post-pandemic. Nonetheless, further analysis suggests several shortcomings in labour market outcomes that must be addressed to ensure income growth returns to pre-pandemic levels. Areas of intervention include the significant skills gap among Malaysian graduates and ensuring that tertiary education meet current industry needs.
Progress and gaps in boosting wage growth
According to the report, Malaysia’s average monthly salaries and wages reported an increase of 6.9 per cent in 2023 (Figure 1). This was the highest rate of growth since the start of the pandemic, achieving levels equivalent to pre-pandemic rates of growth that allowed Malaysia’s monthly salaries and wages to finally surpass the previous peak monthly salaries of RM3,224 in 2019, nearly five years later. While undoubtedly a positive sign that Malaysia’s economic outlook progressing, the post-pandemic Compound Annual Growth Rate (CAGR) of 5.2 per cent requires a further increase in growth rates by 1.5 per cent to reach pre-pandemic figures, suggesting additional effort is needed to boost wages and salaries.
Analysing income growth from a skills perspective reveals that high-skilled occupations experienced especially pronounced increases in their monthly salaries and wages. Although wage growth among low-skilled workers was stronger, Figure 3 shows that increases in incomes in absolute terms among high-skilled occupations have increased by more than RM300 compared to 2022, a more than three-fold increase compared to wages in low-skilled work due to a higher baseline income among skilled workers.
Efforts to continue promoting strong wage growth should thus continue to focus on providing high-skilled work to Malaysia’s labour force. Already, significant numbers of Malaysians are increasingly opting to pursue tertiary education, as many see it as a path to achieve greater social mobility and earn higher salaries. However, many of these graduates are found working in semi-skilled and low-skilled occupations, preventing them from earning incomes matching their level of qualification.
While having reduced slightly from a peak of 37.9 per cent in 2020 (Figure 4), these numbers continue to be significantly higher than pre-pandemic, which had experienced a sharp rise in the number of underemployed workers since 2018. This is reflected in KRI’s Shifting Tides report, where a more granular approach at analysing Malaysia’s skills gap revealed in 2021 that 48.6 per cent of graduates were overqualified, with both recent Diploma and Degree holders sitting at concerningly high rates of 56.1 per cent and 42.5 per cent respectively. Though current rates are not much higher than those reported in high income nations such as the United States and South Korea, this indicates a significant gap in the availability of high-skilled work for workers with tertiary qualifications, and more crucially a persistent skills gap that prevent these workers from attaining skilled, well-paying work.
Nevertheless, while the growth in salaries and wages among skilled workers is encouraging and represents a critical avenue to be pursued to further boost salaries, growth rates remain lower when compared to forecasted salaries pre-pandemic. Except for 2021, while median monthly incomes for skilled workers have grown to RM4,565 in 2023, growth has not been able to recover steeply enough to catch-up with pre-Covid projected monthly incomes of RM4,950, a gap of 8.4 per cent (Figure 5). Economic disruptions from Covid, global events, and supply chain blockages have in turn disrupted income growth, creating the risk of entering an L-shaped recovery in Malaysian salaries if growth only keeps pace with pre-pandemic levels. Further action is thus necessary to ensure the full recovery of Malaysian workers’ wages and salaries.
As such, although progress remains consistently positive, a more detailed look presents possibilities for further improvements that can be pursued by the government to bounce back better than before the pandemic. If efforts to continually promote stronger wage growth are to be more effective, then current initiatives by the government to create opportunities in high skilled occupations must be further strengthened. Targeting policies in sectors such as services could provide the highest returns to increasing the volume of skilled work, as although the mining sector remains the highest in terms of monthly salaries and wages, much of the country’s high skilled occupations are concentrated in the services sector. More effective policies can be undertaken as well to boost investment and economic activity, alongside measures to directly boost wages and salaries.
* Dr Mohd Amirul Rafiq Abu Rahim is a Senior Research Associate at Khazanah Research Institute (KRI) and Muhammad Iqbal Khairuddin is currently a Policy Research Intern at KRI.
** This is the personal opinion of the writers or publication and does not necessarily represent the views of Malay Mail
