KUALA LUMPUR (Feb 19): Malaysia is unlikely to achieve its target of raising the labour income share to 40% of gross domestic product (GDP) by the end of 2025, due to prolonged wage stagnation and the lingering effects of the Covid-19 pandemic, said Economy Minister Datuk Seri Mohd Rafizi Ramli.

He noted that the compensation of employees (CE) to the percentage of GDP had remained stagnant at just over a third of the economy, well below the government’s target under the 12th Malaysia Plan. The Madani government is targeting a longer-term CE ratio of 45% by 2033.

“This is the result of two compounding factors: sluggish wage growth over the years, and the economic impact of the Covid-19 crisis,” Rafizi told the Dewan Rakyat on Wednesday while winding up the debate on the motion of thanks for the royal address.

Wage growth in Malaysia has lagged behind economic expansion, with median monthly salaries rising at an average rate of 4.3% annually between 2010 and 2023 — from RM1,500 in 2010 to RM2,602 in 2023 — the minister said in citing data from the Department of Statistics Malaysia.

However, Rafizi noted there are “early signs of optimism” that wage growth could accelerate. The median monthly salary increased from RM2,600 in June 2023 to RM2,745 in June 2024, representing a 5.6% rise — surpassing the historical average growth rate of 4.3%.

Salaries for fresh graduates grew by 12% over the same period, while highly skilled workers saw their earnings rise by 9.1%.

“These positive developments occurred even before the implementation of key wage-related policies, such as the revised minimum wage, public-sector salary adjustments, and the upcoming progressive wage model,” Rafizi said.

The minister stressed that 2025 will be a critical year, as the government monitors the impact of these wage reforms on the labour market.

Responding to calls for the minimum wage to be raised to between RM2,000 and RM2,500, Rafizi said any decision must be guided by the National Wage Consultative Council and implemented in stages.

“If we rush into drastic increases without proper assessment, it could harm job creation and ultimately undermine the broader economy,” he cautioned.

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