This article first appeared in Forum, The Edge Malaysia Weekly on November 9, 2026 - November 15, 2026
A minimum wage policy is meant to protect workers, irrespective of the industry they are employed in, to get decent monthly salaries. In Malaysia, that means everyone, including cleaners or sweepers, are entitled to at least RM1,700 monthly.
On paper, the policy is seen as progressive because it sets a baseline for how much companies should pay their workers.
But like any other policy measure, there are externalities that weigh on the outcomes and sufficiency of a minimum wage policy. In Malaysia’s case, the intricacies are more complex because of the two-tier minimum wage standard that is in the offing.
The government has set a minimum wage of RM2,000 starting from June next year. However, businesses with a turnover of less than RM50 million a year are exempted. This will result in a two-tier minimum wage system being put in place until the minimum wage rate is standardised.
In essence, a cleaner, for example, could continue to earn RM1,700 under the new wage rule. So, too, would a lorry driver and other casual workers who are mostly employed in the informal sector.
According to Department of Statistics Malaysia (DOSM) data, about seven million workers out of the 16.8 million labour force were earning less than RM2,000 per month as at March this year. In all probability, most of them are working in companies with a turnover of less than RM50 million and, thus, will not be enjoying the RM2,000 minimum wage set under the new policy.
For graduates and semi-skilled workers, the new rules for minimum wages are more complicated.
To start with, the fact that the government has to implement a minimum wage standard for graduates and semi-skilled workers reveals the shortcomings of workers’ remuneration in the country.
The government has stated that graduates and semi-skilled workers are to be paid a minimum of RM2,500 per month, also from June next year. By and large, most of them are employed in the formal sector with all the statutory benefits that go with it.
The minimum rate of RM2,500 is much lower than the country’s median wage for formal workers, which stood at RM3,000 per month as at June this year. This means that by and large, graduates and semi-skilled workers should not have a problem getting a job that pays RM2,500 per month, especially in the developed states. In states such as Kelantan, Kedah and Perlis, the median salaries are probably hovering at less than RM2,500.
This raises the question: Can companies across the country afford to pay the minimum wages for graduates and semi-skilled workers?
A minimum wage of RM2,500 does not include other statutory payments such as the contribution to the Employees Provident Fund (EPF) and medical benefits.
A company in Kuala Lumpur, Johor, Penang or Selangor would easily be able to afford the minimum wages for graduates and semi-skilled workers. The same cannot be said for those located in poorer states.
Ultimately, salaries for graduates and semi-skilled workers would be driven by commercial considerations irrespective of what minimum salary rate the government sets.
In terms of commercial considerations for determining salaries, Minister of Investment, International Trade and Industry Datuk Johari Abdul Ghani pointed out that some companies pay the same minimum wages to foreigners as to locals with skills obtained from vocational training centres.
He had said in parliament that while the foreigners are provided accommodation as well as transport to the workplace, the locals have to pay for rent and arrange their own transport. So, effectively, he said, the local workers are worse off compared with the foreign workers.
The point that Johari made is valid. He also stated that companies that prioritise foreign workers would be penalised, which may not be workable. Restricting companies from employing foreign workers is not the solution.
Generally, companies prefer to hire locals to fill up semi-skilled and skilled positions. It is easier because there is less paperwork and the cultural assimilation process is seamless.
However, what companies often complain about is that semi-skilled or skilled local workers are hard to retain because they tend to get pinched by competitors. Whether they would turn up for work on a daily basis is another issue to deal with.
If the companies employ foreign workers, they have more certainty that the employees would turn up for work and there is no danger of competitors luring their staff away because their work permits would no longer be valid.
Politicians use minimum wage policies to address the cost-of-living issues that workers face. But the policy itself is not a cure-all solution.
For instance, a worker who shares accommodation may find the minimum wage sufficient for his or her needs. However, a worker with dependents will find the minimum wage insufficient. A single parent will find the minimum wage hardly enough when childcare expenses are considered.
As for employers, a minimum wage is only meaningful if the policy makes commercial sense. All said, an employer would not mind paying the minimum wage and even higher to locals if the business has the capacity to absorb it.
Labour market studies have shown that setting high minimum wages affects employment opportunities for younger people looking to start a career or older people searching for jobs. Higher minimum wages also tend to induce employers to push for increased productivity, eventually leading to burnout and putting workers at risk of workplace hazards.
The minimum wage policy is good as political rhetoric. But it cannot compensate for shortcomings in public housing, healthcare, education and other social benefits.
The statutory wage rate will not raise the floor to ensure decent living standards. The other components of social well-being in which the government plays a major role also have to be attended to as well.
M Shanmugam ([email protected]) is a contributing editor at The Edge
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