Quality jobs, not minimum pay, key to income growth

Thursday 17 Sep 2026

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KUALA LUMPUR (July 28): Malaysia needs broader reforms to create better-paying jobs and sustain wage growth as it nears its limits of relying on minimum wage hikes to lift incomes, Bank Negara Malaysia (BNM) assistant governor Datuk Fraziali Ismail said on Tuesday.

Minimum wage hikes had succeeded in raising the income floor but have "no cascading effect" on salaries further up the pay scale, Fraziali said during a plenary session at the Sasana Symposium 2026.

Malaysia now needs to focus on upgrading workers' skills and attracting higher-value investments to create better jobs and raise median incomes, he said.

Fraziali highlighted that the Kaitz ratio — which measures the minimum wage relative to median salary — for Malaysia stood around 0.58 as per BNM’s recent estimates.

“Now we are fast reaching the limit of a good ratio. Beyond that, that becomes punitive to the economy. Too low and it doesn't work. So 0.55 to 0.6 is a sweet spot. So I'm not saying minimum wage shouldn't go up but we should work more to raise the denominator,” said Fraziali.

"Minimum wage really works to raise the floor ... But it doesn't cascade down the higher you go to wage," he said. "So we have built a good floor. What we need to do is let's build the staircase.”

Policymakers, businesses and the media should move beyond headline gross domestic product (GDP) figures and evaluate whether growth and investment are translating into better jobs and higher incomes, urged Fraziali.

Despite an average economic growth rate of 5.2% in the last five years, Malaysians have yet to feel the benefits through stronger income growth, he said.

"There is a disconnect, right? Great macros but not so relatable on the ground," he said, acknowledging low unemployment, low inflation and strong external fundamentals.

To support sustainable wage growth, Fraziali said Malaysia should continue attracting higher-quality investments that create skilled employment, rather than relying on labour-intensive business models.

It also must address structural impediments, including the prevalence of low-skilled foreign workers, insufficient quality jobs and persistent skills mismatches between industry needs and the education system.

While foreign direct investment (FDI) had transformed the economy in previous decades by moving workers into higher-productivity manufacturing jobs, its impact had diminished when investments became increasingly dependent on low-skilled foreign labour, he said.

Policies should also make alternative technologies and productivity-enhancing investments more viable in order to reduce dependence on low-skilled foreign workers, he added.

Further, Malaysia should replicate successful industry-led upskilling efforts, such as the Penang Skills Development Centre, to better align workers' skills with employers' needs, he said.

The panel session focused on what changes need to be made to address sluggish wages and rising living costs in Malaysia and was moderated by PNB Research Institute head of research Farhana Roslan. Other panellists include Carsome co-founder and group CEO Eric Cheng and Manaf Gardner Associates chairperson Datuk Dr Nora Manaf.

Edited ByAdam Aziz

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