70% of Malaysian workers earn RM5,000 or less as wage growth lags rising living costs

Malaysia’s workforce remains heavily concentrated in the lower-income bracket, with more than seven in 10 formal sector employees earning RM5,000 or less a month, underscoring mounting concerns over wage stagnation and affordability pressures despite years of economic growth.

According to the latest data cited by local reports, 70.2% of formal sector workers were earning RM5,000 or below as of December 2025. Economists say the figures highlight a growing disconnect between income growth and the rising cost of living, particularly in urban areas where household expenses continue to outpace wage increases.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said inflationary pressures have placed significant strain on household finances, especially among families with dependents. He noted that the challenge is no longer solely about income levels but also about how much disposable income remains after essential expenses and debt repayments.

The pressure is particularly evident in major cities. Based on Malaysia’s Basic Expenditure for Decent Living (PAKW) benchmark, a young family with two children in Kuala Lumpur requires around RM6,183 a month to meet essential living costs, compared with RM3,845 in Kuala Terengganu, illustrating sharp regional differences in affordability.

The income squeeze is also reflected in financial vulnerability. Insolvency data shows personal loans remain the leading cause of bankruptcy cases, followed by business financing, vehicle loans, housing debt and credit card obligations.

Adding to concerns, Universiti Sains Islam Malaysia economics lecturer Prof Dr Nuradli Ridzwan Shah Mohd Dali estimated that nearly 80% of Malaysians are effectively living from paycheque to paycheque, leaving little room for savings or emergency funds. He cautioned that while short-term borrowing is not always a sign of severe hardship, reliance on informal lenders could deepen long-term financial distress.

The wage challenge comes as a recent report by the World Bank found that Malaysia’s wage growth has significantly lagged behind overall economic expansion. Between 2010 and 2024, median monthly wages rose by 43%, from RM1,300 to RM1,864, while the country’s GDP expanded by 82% over the same period.

The report identified a key structural issue that Malaysia’s most productive companies, often referred to as “frontier firms,” are not scaling fast enough to absorb more workers or drive broader wage gains. These firms, which typically pay wages nearly three times the national median, have seen their market share and workforce absorption decline over the past decade.

Economists argue that barriers including regulatory complexity, financing constraints, skills shortages and limited innovation are preventing high-productivity firms from expanding. The result is a labour market that continues to generate jobs but struggles to create enough high-value roles capable of delivering stronger wage growth.

The World Bank said Malaysia’s challenge is no longer job creation alone, given historically high labour-force participation and low unemployment. Instead, the focus must shift toward creating and scaling high-quality jobs in productive sectors that can offer better pay, stronger career progression and sustained improvements in purchasing power.

Experts warn that unless Malaysia accelerates innovation, improves the business environment and enables its most productive firms to grow, wage growth may continue to lag economic output, leaving many households vulnerable to rising living costs despite the country’s broader economic progress.