INSTITUTE of Strategic Analysis & Policy Research (INSAP) has welcomed the federal government’s plan to raise wages towards RM3,000 by 2030, but cautioned that the policy could deepen economic inequality in Sabah if implemented without broader structural reforms.

INSAP chairperson Datuk Dr Pamela Yong said Malaysian workers deserved better wages, but warned that wage increases alone would not resolve long-standing regional disparities.

“While raising wages is necessary, raising them without first creating the economic conditions to sustain them is not reform,” she said in a statement.

Yong said the income gap between Sabah and Peninsular Malaysia remained a structural issue reflected in household income levels, poverty rates, industrial development, and wage distribution.

She noted that under the government’s projected wage trajectory, Sabah’s minimum wage-to-median wage ratio, known as the Kaitz ratio, could exceed 100% by 2030.

“In simple terms, the proposed wage floor for Sabah could end up being higher than what the median Sabahan worker is expected to earn,” she elaborated.

“This is a warning sign of a weak wage structure and deep regional income disparity.”

Yong said wage policies that outpace productivity growth, investment, and job creation risk slowing hiring, accelerating automation, and increasing informal employment.

She warned that such effects would likely hit Sabah harder due to its narrower industrial base, higher logistics costs, and weaker infrastructure compared to Peninsular Malaysia.

“Peninsular Malaysia may still absorb the shock through its larger urban economies and stronger industrial ecosystems, but Sabah cannot,” she stressed.

“Asking Sabahan employers to carry the same wage increases on the same timeline, without parallel economic support, is effectively asking Sabah to bear the cost of a policy designed for the Peninsula.”

Yong said a one-size-fits-all wage policy could ultimately widen the development gap between Sabah and the rest of the country if not accompanied by targeted reforms.

She urged the federal government to introduce a comprehensive regional economic plan for Sabah, including infrastructure upgrades, lower logistics costs, industrial expansion, skills development, and stronger investment incentives.

INSAP also called for sectoral and state-level implementation mechanisms that take into account Malaysia’s differing economic conditions.

“Workers deserve higher wages, but they also deserve real jobs to earn them,” Yong stated.

“A policy that raises wage floors while reducing quality employment opportunities risks delivering neither long-term economic mobility nor dignity to Sabahans.” ‒ May 12, 2026

Main image: The Star

The post Sabah could bear the brunt of RM3,000 wage push, warns think tank first appeared on Focus Malaysia.