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SHAH ALAM: Malaysians' real wages have declined nearly threefold over the past four decades, said former Bank Negara Malaysia governor, Tan Sri Muhammad Ibrahim.
He pointed out that fresh graduates today earn between RM2,000 and RM3,000 a month, a modest increase from the RM1,300 monthly starting salary he received in 1984, despite decades of inflation.
According to a Sinar Harian report, Muhammad said graduate salaries today should be closer to RM7,000 to RM8,000 when adjusted for a five per cent annual inflation rate.
"This equates to the purchasing power of RM300 – RM400 in the 1980s. In reality, wages have eroded by at least threefold," he told Sinar Harian.
Muhammad warned that without a serious overhaul of Malaysia's education system and economic structure, future generations may end up trapped in low-skilled, low-paying jobs.
He said Malaysia has been stuck in a middle-income trap for years, with stagnant wages tied to multiple structural issues, including heavy reliance on low-skilled foreign workers, failure to generate high-quality jobs, and an outdated education and skills training system.
As of December 31, last year Malaysia's labour force numbered 16.78 million, with 14 per cent or 2.37 million being foreign workers, most of whom are employed in the 3D (dirty, dangerous, and difficult) sectors like plantations, construction, manufacturing, and domestic services.
"These workers are generally low-skilled and inexperienced, which makes them cheaper to hire and puts direct wage pressure on Malaysia's low-income earners," he said.
Malaysia's economy, he added, has not been able to generate large-scale, high-value jobs for its citizens.
This is made worse by brain drain, especially among skilled professionals like nurses, many of whom have migrated to Singapore, the Middle East, Australia, and New Zealand.
He also highlighted the growing number of Malaysians commuting daily to Singapore, not to work in high-ranking roles but to perform manual labour due to better wages.
"If Malaysia fails to transform its economic structure, we risk becoming a net exporter of labour rather than talent. One day, our children could end up working as domestic helpers abroad — and I wouldn't be surprised if it happens," he warned.
On the government's proposed reclassification of income groups from B40, M40, and T20 to B20, M50, and T30, Muhammad said the B40 group might now cover as much as 60 per cent of the population, as wage growth has been stagnant, especially since the Covid-19 pandemic.
"Many in the B40 group are living paycheck to paycheck, with no savings to fall back on," he said, contrasting today's reality with his own experience, where he was able to buy a car six months into his job in the 1960s, and a house after just three years.
He noted that Malaysia has been too cautious in tackling structural problems.
"Gross Domestic Product figures are misleading. We need to focus on the job structure of the economy. What kinds of industries are we creating? Are they generating high-value employment? That's the real measure of progress," he stressed.
Muhammad, a Harvard graduate and former managing director of Danamodal during the 1997 Asian Financial Crisis, served as BNM governor from 2016 to 2018.
He emphasised that Malaysia can reform, citing how countries like China, Taiwan, South Korea, and Japan, once behind Malaysia in per capita income in the 1960s, are now far ahead after decades of targeted growth.
"We shouldn't benchmark ourselves only against Asean or weaker economies. We should aim for high-performing economies and focus on creating quality jobs. That's what matters."
Source: https://www.nst.com.my/news/nation/2025/05/1211265/malaysias-real-wages-down-threefold-40-years-says-former-bnm-governor