Malaysia must focus on quality jobs, not minimum wage hikes, to lift incomes: BNM assistant governor

Malaysia needs to shift its focus from repeated minimum wage increases to creating higher-quality jobs, upgrading workers’ skills and attracting higher-value investments to sustain income growth, Bank Negara Malaysia (BNM) assistant governor Datuk Fraziali Ismail said.

Speaking at a plenary session at the Sasana Symposium 2026, Fraziali said minimum wage increases had helped raise the income floor for workers but had not produced a cascading effect on salaries further up the pay scale.

“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.”

Fraziali said Malaysia’s Kaitz ratio, which measures the minimum wage against the median salary, stood at around 0.58 based on BNM’s recent estimates. He said a ratio between 0.55 and 0.6 represented a “sweet spot”, warning that pushing the ratio significantly higher could become punitive for the economy.

“I'm not saying minimum wage shouldn't go up but we should work more to raise the denominator,” he said.

The comments come as Malaysia looks to translate relatively strong macroeconomic performance into stronger household incomes. Fraziali noted that the economy had grown at an average rate of 5.2% over the past five years, while unemployment and inflation remained low and external fundamentals were strong.

However, he said these improvements had not necessarily translated into stronger income growth for Malaysians.

“There is a disconnect, right? Great macros but not so relatable on the ground,” Fraziali said.

He called for policymakers, businesses and the media to look beyond headline GDP figures and assess whether economic growth and investment were creating better jobs and raising incomes.

Fraziali said Malaysia should prioritise higher-quality investments that generate skilled employment rather than relying on labour-intensive business models.

He pointed to the continued prevalence of low-skilled foreign workers, a shortage of quality jobs and persistent skills mismatches between industry requirements and the education system as structural barriers to stronger wage growth.

Foreign direct investment (FDI) had previously helped transform Malaysia’s economy by moving workers into higher-productivity manufacturing jobs, he said. However, the impact had weakened as some investments became increasingly reliant on low-skilled foreign labour.

Malaysia should therefore make alternative technologies and productivity-enhancing investments more viable to reduce dependence on low-skilled foreign workers, Fraziali said.

At the same time, he stressed the need for stronger industry-led skills development. He cited the Penang Skills Development Centre as an example of how closer alignment between employers and training institutions can help ensure workers develop skills that are relevant to industry demand.

The panel discussion examined the reforms needed to address sluggish wage growth and rising living costs in Malaysia. It was moderated by Farhana Roslan, head of research at PNB Research Institute, and also featured Carsome co-founder and group CEO Eric Cheng and Manaf Gardner Associates chairperson Datuk Dr Nora Manaf.