KUALA LUMPUR, 19 June 2025: Bank Negara Malaysia (BNM) highlighted that tackling inflation alone will not resolve Malaysia’s cost-of-living crisis, emphasizing an urgent need for structural reforms to boost stagnant wage growth and ensure incomes keep pace with rising prices.
Deputy Governor Datuk Marzunisham Omar noted that despite easing headline inflation due to timely monetary policies, high price levels continue to erode household purchasing power, compounded by moderate wage increases.
Since the first quarter of 2020, food and beverage prices have cumulatively soared by 17.5 percent, while the overall Consumer Price Index rose by 9.8 percent. In stark contrast, nominal private sector wages increased by only 7.9 percent over the same period. This disparity means real wages per worker actually declined by 1.9 percent, significantly contributing to the current cost-of-living strain felt by Malaysians.
Speaking at the Sasana Symposium 2025, Marzunisham pointed out a critical misalignment: despite a 7.4 percent rise in productivity per worker from Q1 2022 to Q2 2025, real wages concurrently fell. This indicates a structural issue where productivity gains are not translating into higher wages.
To address this, BNM advocates for creating more high-paying and skilled jobs through strategic investments. While investment approvals for 2023 and 2024 have been encouraging, leading to an increase in high-skilled jobs to about 30 percent of the economy (up from 25 percent), more efforts are needed.
Additionally, policymakers must tackle supply-side issues, particularly the skill mismatch among fresh graduates. Between 2022 and 2023, approximately 260,000 graduates entered the job market, yet only about 150,000 high-skilled jobs were created annually. This significant gap has resulted in high underemployment, with about 36 percent of graduates working in mid- or low-skilled positions due to a lack of suitable high-skilled employment. Employers also report difficulties finding appropriately skilled workers.
Marzunisham suggested exploring differentiated minimum wages based on skill levels, as adopted by some countries. He underscored the importance of reforming the entire wage determination ecosystem, advocating for greater collaboration and engagement among employers, employees, and government unions to collectively decide on wage increments, rather than leaving it solely to market forces.
