THE country’s expanding pool of university-educated workers is colliding with an economy still dominated by low-skilled jobs, economists and labour experts say, fuelling wage stagnation and widening concern over the country’s long-term productivity trajectory.
Academics and industry leaders have warned that the structure of the labour market has failed to evolve alongside rising educational attainment, leaving many graduates trapped in underpaid or mismatched employment despite years of economic expansion.
A recent World Bank report found that wage growth in Malaysia has substantially lagged behind overall economic growth over the past decade, raising questions over how the gains of development are being distributed across society.
Universiti Putra Malaysia deputy dean at the School of Graduate Studies Prof Dr Rusmawati Said told The Star that the economy continued to generate jobs suited largely to secondary-school leavers rather than a modern, highly educated workforce.
“The nature of jobs available here is still based on an outdated economic structure, similar to what existed 20 years ago.
“Many jobs are still concentrated at the secondary or low-skilled level, where the minimum requirement is only an SPM qualification,” she said.
The World Bank report, titled Raising the Ceiling, Raising the Floor: The Jobs Agenda as a Productivity Agenda, found that while Malaysia’s gross domestic product expanded by 82 per cent between 2010 and 2024, real wage growth significantly underperformed.
Median monthly wages rose from RM1,300 to RM1,864 during the period, while average wages increased from RM1,792 to RM2,570 — representing real growth of 43 per cent, barely half the pace of GDP expansion.
The findings suggest that although the economy grew steadily, workers did not proportionately share in the gains, with wage increases averaging roughly three per cent annually and slowing sharply during periods of economic stress, including the 2014 adjustment cycle and the Covid-19 pandemic in 2020.
The report also highlighted uneven wage gains across income groups. Although lower-income workers recorded the largest percentage increases, economists noted this was from a comparatively small base and involved a significant concentration of foreign labour.
Meanwhile, middle-income earners experienced some of the weakest real wage growth, intensifying pressure on households already grappling with rising living costs.
Prof Rusmawati said the widening disconnect between qualifications and job opportunities had entrenched underemployment among graduates and skilled workers, contributing to frustration among younger Malaysians entering the workforce.
President of the Malaysian Employers Federation Datuk Dr Syed Hussain Syed Husman defended current wage trends, arguing that salaries continued to reflect prevailing market conditions and productivity levels.
“Wages are growing in line with the real economic situation on the ground. Wages have to go along with skills, experience and productivity,” he said.
He added that labour shortages were no longer a major concern for employers due to Malaysia approaching full employment, although underemployment remained a structural challenge.
“We face some underemployment issues because many workers are highly qualified, and aligning their jobs with their skills and knowledge will require time and progression,” he said.
Economist Prof Emeritus Datuk Dr Zakariah Abdul Rashid said the deeper concern lay in the declining share of national income flowing to workers despite continued economic growth.
He pointed to the Compensation of Employees ratio — a measure of how much national income is distributed through salaries and wages — as evidence that employees were receiving a shrinking portion of economic gains while profits and capital returns increasingly dominated.
While labour productivity and real wages have both risen over time, he said wage growth has consistently failed to keep pace, creating a widening imbalance between workers and businesses.
Prof Zakariah warned that isolated policy measures would be insufficient to address the issue, arguing that Malaysia required sweeping structural reforms across both the labour market and productive sectors to ensure future economic growth delivered broader and more equitable benefits. - May 18, 2026
