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MALAYSIA’S real wages have declined nearly threefold over the past 40 years, according to former Bank Negara Malaysia Governor, Tan Sri Muhammad Ibrahim, who has raised serious concerns over the country’s economic structure and the future of its workforce.
“Based on a simple calculation, the starting salary for university graduates today is around RM2,000 to RM3,000 a month, compared to RM1,300 a month when I graduated in 1984,” he said. “Taking into account an annual inflation rate of five per cent, today’s graduate salaries should be around RM7,000 to RM8,000.”
He noted that this equates to a purchasing power equivalent to about RM300 to RM400 in the 1980s. “In reality, our wages have declined by at least threefold,” he added.
Muhammad warned that without a complete overhaul of the education system and the country’s economic structure, future generations may be forced into low-skilled labour roles. “If these issues persist, our children may end up as low-skilled workers,” he cautioned.
He pointed out that Malaysia has long been caught in the middle-income trap, and low wages are not an isolated problem but stem from multiple interlinked factors. These include an over-reliance on foreign labour, failure to create high-quality, high-paying jobs, and an outdated education system.
Foreign workers, who account for 14 per cent of Malaysia’s 16.78 million-strong labour force as of 31 December 2024, are largely employed in the 3D sectors – dirty, dangerous, and difficult – such as plantations, fisheries, manufacturing, construction, restaurants, and domestic work.
“Most of the foreign workers hired over the past few decades are low-skilled and inexperienced, making them cheaper to employ,” he explained. “This situation has created direct competition for the low-income (B40) group as wages have stagnated.”
Malaysia has also failed to generate high-paying employment opportunities due to an inefficient and small-scale economy, he added. This has resulted in a lack of quality job prospects for graduates.
“Our education and skills training systems are likely outdated and no longer aligned with 21st-century market needs, which affects productivity and national competitiveness,” he said.
Muhammad criticised the government’s cautious approach, arguing it has hindered much-needed economic reforms. “All these issues reflect a government that is hesitant and too cautious to undertake comprehensive reform,” he said. “Malaysia should stop depending on GDP figures and instead focus on employment structure to drive economic progress.”
He highlighted that most new jobs being created are low-skilled and require no experience, which has attracted workers from countries such as Nepal, Bangladesh, and Indonesia due to Malaysia's comparatively higher wages.
“Malaysia is also experiencing a brain drain, especially in nursing, where many are moving to Singapore, the Middle East, Australia, and New Zealand,” he said. According to data from JobStreet, nurses in Malaysia earn an average of RM2,700 to RM3,400 per month, compared to RM11,000 to RM13,000 in Singapore and nearly RM7,000 in Saudi Arabia.
He noted that many Malaysians now commute daily to Singapore for work – not as CEOs or CFOs, but in manual jobs due to significantly better wages.
“If we fail to reform our economy and create high-paying jobs, we risk shifting from a ‘talent exporter’ to a ‘labour exporter’ nation,” he warned. “We are already seeing more Malaysians no longer qualify for high-ranking positions abroad, and instead settling for lower-skilled jobs in neighbouring countries.”
“If one day our children end up working as domestic helpers in neighbouring nations, I would not be surprised. It’s entirely possible,” he remarked.
His comments follow Economic Affairs Minister Rafizi Ramli’s proposal to revise income classifications from B40, M40, and T20 to B20, M50, and T30, following Prime Minister Datuk Seri Anwar Ibrahim’s announcement of a minimum wage hike to RM1,700.
The new classification system, developed by the Khazanah Research Institute, categorises households based on spending patterns and capabilities rather than just income levels.
However, Muhammad questioned the effectiveness of this approach in truly reflecting Malaysians’ economic reality. He believes that under the old system, the B40 group could now represent up to 60 per cent of the population.
“Wages have barely improved, especially post-Covid-19, and many in the B40 group have no savings, struggling to get by from one paycheque to the next,” he said.
Reflecting on his early career, Muhammad said that the 1960s were a golden era, when he could afford a car after six months of work and a house after three years.
“But the question remains: will today’s youth live better lives than we did? I am not sure,” he said.
He believes the lack of urgency among both government and the public is contributing to Malaysia’s stagnation in the middle-income bracket. “There is no mindset to compete, despite the challenges we face,” he said.
Muhammad, a Harvard graduate and former Managing Director of Danamodal Nasional Bhd during the 1997 Asian Financial Crisis, served as Bank Negara Malaysia Governor from 2016 to 2018. He remains optimistic that Malaysia has the potential to transform and reach high-income status.
“Look at the 1960s – China, Taiwan, South Korea, and Japan had lower per capita incomes than Malaysia, but their incomes increased five- to six-fold over the next 40 years,” he said.
He stressed that Malaysia should stop comparing itself with ASEAN or weaker economies and instead benchmark against high-performing nations.
“Focusing on GDP is a misguided approach. Real indicators of economic progress should be based on the nature of employment,” he said. “What kinds of industries are being developed? What jobs will be needed in the future? Which sectors are creating job opportunities? Are those jobs high-value?”
“In every international forum I’ve attended, policymakers in advanced nations don’t talk about GDP – they talk about jobs. That’s what really matters,” he added. - May 4, 2025