10/06/2026
๐ฃ๐ฅ๐ข๐๐จ๐๐ง๐๐ฉ๐๐ง๐ฌ ๐จ๐ฃ, ๐ช๐๐๐๐ฆ ๐ช๐๐๐ก?
Media statement | 10 June 2026
The call to link wage reform to productivity once again assumes that Malaysian workers have yet to earn higher wages through their contribution to the economy. The evidence suggests otherwise.
Parti Sosialis Malaysia (PSM) argues that such recurring arguments that wages must wait for higher productivity puts the cart before the horse.
At an event titled โNavigating External Uncertainties, Strengthening Resilienceโ on June 9, 2026, Economy Minister Akmal Nasir said that while higher wages are necessary, โa bigger issue we need to address is productivity. Better wages must mean better productivity.โ [1]
Touting the Progressive Wage Policy (PWP) as solution once again, Akmal added that whether workers โlike it or not,โ PWP buy-in from companies and industries is vital because โthe effort of addressing wages involves the government and private sectors.โ
๐ฃ๐ฟ๐ผ๐ฑ๐๐ฐ๐๐ถ๐๐ถ๐๐ ๐ณ๐ผ๐ฟ ๐๐ต๐ผ๐บ?
This is precisely why workers are increasingly sceptical whenever employers demand โmore productivity firstโ before any wage increments. The question is: productivity for whom?
Almost every day, Malaysian workers are told that higher wages must wait for higher productivity. The evidence, however, suggests that labour productivity in Malaysia has risen steadily over the years, while worker compensation has lagged behind.
According to data from the Department of Statistics Malaysia (DOSM), labour productivity defined as value-added per hour has consistently been on an upward trend and grew 4.9% in the fourth quarter of 2025, totalling RM45.30 per hour. It came in higher than the growth of 1.4% in Q4 2024, amounting to RM44.20 per hour. [2]
Sectorally, labour productivity saw growth across most sectors in Q3 2025 and Q4 2025. [3] Construction led the growth at 10.3% for the quarter versus 10.2% and 9.3% in the preceding quarters respectively.
The manufacturing, agriculture, and service sectors recorded 6.5%, 5.6% and 4% labour productivity growth during Q4 2025, with the only exception being the mining sector, whose productivity dropped from 9.2% to 4.2% in the same quarter. [4]
Meanwhile, labour productivity per employment rose, amounting to RM26,765 per person in Q4 2025, compared to RM24,866.10 per person in Q1 2025.
Data from Khazanah Research Institute also reveals that labour productivity has increased by โalmost two-and-a-half-foldโ across three decades, from 1985 to 2016. The labour productivity level in 1985 was around RM28,000 per worker, measured in 2010 prices. That same workerโs labour productivity increased to RM71,000 in 2016.
The two-and-a-half fold increase was buoyed by the โrise in labour productivity in the manufacturing sector, which increased by nearly three-and-a-half times between 2016 and 1985.โ [5] The services and agricultural sector increased by about two-and-a-half times and two times respectively during the same period.
More evidence comes from Bank Negara Malaysia (BNM), who concurred that โwages caught up with the cumulative productivity gains only in 2024โ when indexed to 2019 levels. [6]
Anchor the above information with the following: according to Ministry of Finance, the Malaysian economy grew 5.2% in 2024 and 2025, and โexceeded expectations for a second consecutive quarterโ by growing 5.4% in Q1 2026. [7]
Increase in labour productivity levels across various sectors between Q3 2025 and Q4 2025 were also complemented by increase in gross domestic product (GDP) across those sectors. The service sector GDP grew from 5.3% in Q3 2025 to 6.2% in Q4 2025; during the same period, the manufacturing sector GDP grew from 4.1% to 6.0%, while the agricultural sector GDP grew from 0.2% to 5.7%. [8]
So, labour productivity grew, and GDP grew and โexceeded expectationsโ. What are we missing?
๐ช๐ผ๐ฟ๐ธ๐ฒ๐ฟ๐' ๐ฐ๐ผ๐บ๐ฝ๐ฒ๐ป๐๐ฎ๐๐ถ๐ผ๐ป
Here is where the compensation of employees (CE) in GDP figures come in. CE measures the compensation paid to workers for their labour, through wages, salaries, bonuses, commissions, paid time off, and incentives.
Seen through GDP, CE can be viewed as how much of the wealth accrued is actually channelled into compensating employees.
BNM has long highlighted that CE in Malaysia โremain stagnated at a little over one-third of the economyโ compared to other countries, such as the United Kingdom (49.8% of GDP), United States (51.9% of GDP), and Germany (54.7% of GDP). [9]
In 2024, CE comprised 33.6% of the Malaysian GDP, growing from 33.5% of GDP in 2023; [10] both notably well off the Madani governmentโs 13th Malaysia Planโs target ratio of 40% by 2030.
However, a direr observation emerges when we look beyond the headline 33.6% CE share of GDP, and dive deeper into the sectoral CE share of GDP.
The manufacturing and service sectorsโ CE share of GDP only stood at 2.2% and 5.5% respectively, accruing less than one-sixth of the cumulative CE share of national GDP. The two biggest contributors to CE share of GPD were instead the mining and construction sectors, at 14.2% and 18.0%. [11]
The above is all the more appalling because manufacturing and service sectors employ nearly four-fifths the labour force: in 2024, the service sector led with the largest share of 51.9% (4.7 million) of total jobs, while manufacturing placed second at 27.7% (2.5 million). [12]
This means 79.6% of total jobs created in 2024 only contributed less than one-sixth of CE share of GDP. The mining and construction sectors, which contributed 14.2% and 18.0% CE share, only comprised 0.9% (80,000) and 14.0% (1.27 million) of total jobs created. [13]
Therefore, three distinct observations emerge: firstly, the labour productivity levels have increased, seen in the last quarter or the last 30 years, across most sectors.
Secondly, the GDP has increased year-on-year and โexceeded expectations,โ even across the two important sectors, manufacturing and services.
Thirdly, the CE share of those two sectors which employ nearly four-fifths of Malaysian labour force only coughed out 2.2% and 5.5% of their GDP back to their workers.
๐ช๐ผ๐ฟ๐ธ๐ฒ๐ฟ๐ ๐ฏ๐ฒ๐ฐ๐ผ๐บ๐ถ๐ป๐ด ๐ฝ๐ผ๐ผ๐ฟ๐ฒ๐ฟ
In the midst of this, Malaysian workers have become poorer, literally.
According to BNM deputy governor Marzunisham Omar, โreal wages have declined despite gains in productivity.โ [14] Between Q1 2020 to Q1 2025, the consumer price index (CPI) rose by 9.8%, while food and beverage prices surged by 17.5%.
The BNM deputy governor reported that โnominal wages in the private sector grew by only 7.9% over the same periodโresulting in a real wage decline of 1.9%.โ
Graduates, meanwhile, faced a precipitous drop in median starting salaries, from RM2,112 in 2018 to RM1,747 in 2023, with โmany entering the labour market at near-minimum wage levels.โ
When zoomed out for historical context, another former BNM governor also concurred that Malaysianโs real wages โhave declined nearly threefold over the past four decades.โ [15]
Consider again our country, whereby almost 80% of the labour force works in two sectors whose compensation to employees barely reaches one-sixth of GDP.
The fundamental question Akmal Nasir should be asking is: if rising productivity does not lead to rising wages, how much more productivity must workers deliver before they qualify for a decent standard of living?
According to recent estimates, 80% of Malaysians โlived from paycheque to paychequeโ spending almost all monthly income on โdaily expenses, leaving little or nothing for savings.โ [16]
The Minimum Wage Order 2024 only just raised the formal wage floor to RM1,700 around August 2025, when BNM, since 2018, has been championing for RM2,700 and RM4,500 living wages for single adults and couples (without child) living in Kuala Lumpur. [17]
๐ช๐ฎ๐ด๐ฒ๐ ๐น๐ฎ๐ด๐ด๐ถ๐ป๐ด ๐ฏ๐ฒ๐ต๐ถ๐ป๐ฑ
This is why continuously conditioning wage increases on future productivity becomes a moving goalpost.
The PWP, which former Economy Minister Rafizi Ramli touted and his successor Akmal is championing, once again anchors the minute wage gains upon increasing productivity, ostensibly through training and upskilling courses, without fundamental regard to the fact that productivity has risen, but it is wages that lag behind.
Even worse, PWP operates on a voluntary basis, meaning employers have the option to opt-out.
If the government is this unserious about raising wages for workers, so much so that the landmark policy being touted by Economy Minister remains voluntary, how can the workers trust the Madani governmentโs efforts in being โmore compassionate towards workersโ? [18]
Workers increase productivity. Wages lag behind. Then workers are told productivity must increase again before wages can rise.
The fundamental issue therefore is not whether productivity matters. Workers, through increasing labour productivity across the last three decades, have already demonstrated that productivity matters to them too.
Rather, the issue remains who captures the gains when productivity rises.
A serious wage reform agenda should not begin by telling the workers to further increase their productivity levels, or buy into PWP as a solution whether workers โlike it or not.โ [19]
PSM recognises that actual, meaningful wage reform should begin by recognising that Malaysian workers have already generated significant productivity growth.
The challenge now is ensuring that the benefits of that growth are shared more fairly instead of being perpetually deferred to some future productivity target that never seems to arrive.
๐ง๐ต๐๐น๐ฎ๐๐ถ๐ฑ๐ฎ๐๐ฎ๐ป ๐๐ฒ๐ฒ๐๐ฎ๐ฟ๐ฎ๐๐ถ๐ป๐ฎ๐บ
PSM Workersโ Bureau
๐ก๐ผ๐๐ฒ๐
1. Lynelle Tham. โWage reform needs industry buy-in, productivity link, says economy minister.โ Free Malaysia Today. June 9, 2026. https://www.freemalaysiatoday.com/category/nation/2026/06/09/wage-reform-needs-industry-buy-in-productivity-link-says-economy-minister
2. Department of Statistics Malaysia (DOSM). โLabour productivity.โ OpenDOSM. https://open.dosm.gov.my/dashboard/labour-productivity
3. Esther Lee. โClosing the gap between productivity and wages.โ The Edge. March 5, 2026. https://theedgemalaysia.com/node/793838
4. DOSM. โLabour productivity.โ
5. Tan Zhai Gen and Allen Ng. โProductivity in progress: Labour productivity in Malaysia over the last three decades.โ Khazanah Research Institute. June 1, 2017. https://www.krinstitute.org/publications/productivity-in-progress-labour-productivity-in-malaysia-over-the-last-three-decades
6. Luqman Amin. โMalaysiaโs wage growth lags productivity, more reforms needed, says BNM.โ The Edge.
March 31, 2026. https://theedgemalaysia.com/node/798036
7. Ministry of Finance Malaysia (M*F). โMalaysiaโs economy grows 5.4% in Q1 2026, outpacing expectations amid global uncertainty.โ M*F. May 15, 2026. https://mof.gov.my/portal/en/news/press-release/malaysias-economy-grows-5-4-in-q1-2026-outpacing-expectations-amid-global-uncertainty
8. DOSM. โGross domestic product.โ OpenDOSM. https://open.dosm.gov.my/dashboard/gdp
9. Luqman. โMalaysiaโs wage growth lags productivity.โ
10. DOSM. โGross domestic product income approach.โ DOSM. July 30, 2025. https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-income-approach-2024
11. Ibid.
12. DOSM. โEmployment statistics, fourth quarter 2024.โ DOSM. February 13, 2025. https://www.dosm.gov.my/portal-main/release-content/employment-statistics-fourth-quarter-2024
13. Ibid.
14. Luqman Amin and Yap Yan Qing. โExperts call for urgent labour reforms as Malaysian real wages decline.โ The Edge. June 17, 2025. https://theedgemalaysia.com/node/759261
15. โMalaysia's real wages down threefold in 40 years, says former BNM governor.โ New Straits Times. May 4, 2025. https://www.nst.com.my/news/nation/2025/05/1211265/malaysias-real-wages-down-threefold-40-years-says-former-bnm-governor
16. Mukhriz Mat Husin. โ70pct of Malaysian workers earn RM5,000 and below.โ New Straits Times. June 9, 2026. https://www.nst.com.my/news/nation/2026/06/1458785/70pct-malaysian-workers-earn-rm5000-and-below
17. Eilyn Chong and Farina Adam Khong. โThe living wage: Beyond making ends meet.โ Monetary Policy Department, Bank Negara Malaysia. March 2018.https://www.dosm.gov.my/uploads/content-downloads/file_20221107002722.pdf
18. โPM urges employers to be more compassionate towards workers.โ Free Malaysia Today. May 1, 2026. https://www.freemalaysiatoday.com/category/nation/2026/05/01/pm-urges-employers-to-be-more-compassionate-towards-workers
19. Tham. โWage reform needs industry buy-in.โ