KUALA LUMPUR (May 20): Malaysia's minimum wage policy has narrowed the wage disparity between entry-level workers with different education qualifications over the past decade, according to a recent survey by PNB Research Institute.

The research found that entry-level workers with lower qualifications, specifically PMR and SPM graduates, experienced significantly higher real wage growth following the implementation of minimum wage policies in 2012.

While those with degrees still earn more, their wage growth has been comparatively slow, leading to a substantial reduction in the wage premium associated with higher education.

Drawing on 26 editions of the MEF Salary Survey (1997–2022), this study is among the first to examine a long-term dataset of private-sector wages in Malaysia, according to the institute.

The institute found that the 10-year real median monthly salary growth for entry-level PMR graduates rose to 64% in the decade following the implementation of minimum wages in 2012, compared to just 19% in the previous decade. SPM holders also saw their real wage growth improve to 37%, up from 10% over the same period.

Conversely, degree holders saw a marginal improvement in real wage growth, capped at 5% with some instances of a 3% decline, while master’s degree holders experienced a steeper downturn, falling from 4% to 10%.

The wage premium for holding a degree over an SPM certificate has shrunk significantly — from 167% in 1997 to 128% in 2012 and just 67% by 2022.

The research also highlighted that TVET diploma holders have seen stronger wage growth than those with academic diplomas in the same period. Over the past decade, TVET diploma holders saw a 14% increase in real wages, compared to just 2% for academic diploma holders.

In 2012, TVET diploma holders earned RM1,300 compared to RM1,500 for academic diploma holders. By 2022, the figures had risen to RM1,800 for TVET holders and RM1,850 for academic diploma holders.

PNB Research noted that while the minimum wage appears to have achieved its goal of reducing wage inequality, it has also diminished the relative wage advantage of pursuing higher education.

As a way forward, the institute recommended complementing the minimum wage with broader reforms — including a living wage policy and the proposed progressive wage policy — to ensure more meaningful income growth.

PNB Research also called for stronger centralisation and institutionalisation of wage bargaining between employers and employees. The government, it added, should play a role in facilitating the readiness of employer and employee institutions to negotiate and enforce fair wage outcomes.