KUALA LUMPUR (March 24): Wage growth in Malaysia moderated in 2024 despite significant improvements in labour productivity, Bank Negara Malaysia (BNM) said.

Labour productivity growth, measured in real value-added per employment, accelerated to 2.4% in 2024 from 0.7% in 2023, according to the central bank’s Economic and Monetary Review 2024 released on Monday. Wage growth, however, was “modest” at 2.9%, compared to 3.8% in 2023.

The deceleration in wage growth was due to “conservative wage-setting behaviour,” BNM said. Industrial engagement revealed that uncertainty over minimum wage revision, concerns over the sustainability of demand and rising input costs were some of the reasons for the caution, it noted.

“In addition, firms also retained a larger than usual workforce post-pandemic, which led to additional labour cost,” BNM said. “This additional cost burden may have exerted downward pressure on wage growth during the year.”

Low wages are sore points for a large majority of Malaysians grappling with rising cost of living, even as the country’s economy expanded rapidly. For years now, employees’ share of labour income has largely stagnated at a little over one-third of Malaysia’s economic output.

Employers, meanwhile, have long argued that wage growth must track productivity. However, productivity has risen 5.3% cumulatively since 2019, while real wage growth per worker has declined 1.9% in the same period, according to BNM’s data.

The government has raised the minimum wage to RM1,700 per month under a law that mandates a review at least once every two years. To further nudge firms, the government is also pushing for progressive wage policy.

By economic sectors, wages in the services sector had increased 3.6% in 2024 versus 3.5% in 2023, while growth in manufacturing moderated to 1.5% last year from 3.5% a year earlier. Public sector wage growth remained strong at 5%, compared to 5.2%.

The improvement in productivity, meanwhile, was broad-based across all sectors, according to BNM. Manufacturing sector’s productivity growth turned positive compared to 2023, while workforce efficiency in the construction sector surged 16.5% in 2024, compared with 4.9% in 2023.

Click here to read more stories on BNM Annual Report 2024.