Decline in Real Wages?

A report by Permodalan Nasional Bhd Research Institute (PNBRI) highlights a concerning trend: Entry-level wages have generally increased over the past 25 years, the growth for tertiary graduates has lagged significantly. Adjusted for inflation, median entry-level salaries for master’s graduates fell by 28%, and for bachelor’s degree holders by 10%, over the period. In contrast, wages for lower- qualified workers, such as PMR holders, grew by 89%. 

This disparity underscores the widening gap between the supply of degree holders and the demand for their skills, leading to stagnating or even declining real wages for graduates. The report adds: “In 1997, degree holders earned 2.7 times more than SPM holders; by 2022, the gap had narrowed to 1.7 times.” 

Source: https://www.wikiimpact.com

PNBRI says a median fresh master’s graduate in 2022 earned nearly one-third less than a counterpart in 1997, in real terms, before concluding: “The higher the qualification of an entry-level employee, the lower the salary has grown over the period.” 

There are several causes, especially if seen from the eyes of a degree holder. 

First, an increase in university graduates without a proportional increase in demand can result in lower wage growth. For example, 25 years ago, Malaysian students believed that a degree in actuarial studies would lead to a sky-high salary and financial independence. Despite the avalanche of students pursuing for an actuarial degree back then, it remains the case that most insurers would only require a few actuaries. 

According to the Statistics Department, the number of graduates in Malaysia increased by 4.4% between 2019 and 2020, reaching 5.36 million, indicating an upward trend in degree holders. The absence of a proportional increase in high-skilled job opportunities may have saturated the market, reducing graduates’ wage growth. Fresh graduates today earn between RM2,000 and RM3,000 a month, well below the RM7,000 to RM8,000 suggested by former Bank Negara governor Tan Sri Muhammad Ibrahim. This is the disconnect between market demand and graduate supply. Because of the oversupply of skilled workers, many graduates are forced into semi-skilled or low-skilled jobs, where their education is underutilised, further depressing wages. 

According to research by think-tank Economist Impact, a persistent skills mismatch exacerbates slow wage growth because many graduates lack the practical, industry-specific skills employers require, particularly in high-demand fields such as technology, engineering, and digital services such as artificial intelligence, data analytics, and cybersecurity. 

Some studies show that about 70% of graduates work in semi- or low-skilled jobs, with more than 65% earning below RM3,000 monthly, reflecting underemployment due to skills misalignment. Academic degrees may not equip graduates for the evolving digital and industrial economy, which prioritises specialised skills. Minimum wages, currently at RM1,700, also directly benefit lower-skilled workers, often high school graduates, by ensuring their wages rise faster than those of degree holders. 

Malaysia’s youth must match their education and skills to market demands to better understand the country’s needs and supply accordingly. And universities have a serious role to play. Instead of churning-out graduates in humanities, look at the needs of the future and offer courses relevant for that purpose. Engage with industry and those associations/think-tanks that monitor job demand. 

Reference:

Dire degree of decline in real wage, Keith Hiew, Insight, The Star, 24 May 2025