More work hours needed to maintain everyday living standards
KUCHING: Malaysians are working longer hours to afford basic necessities as wage growth continues to lag behind prices, even as headline inflation remains low, said Bank Negara Malaysia (BNM).
In its Annual Report 2025 and Economic and Monetary Review 2025, the central bank stressed that inflation alone does not fully reflect the cost pressures faced by households when incomes fail to keep pace with rising prices.
BNM noted that while headline inflation eased to 1.4 per cent in 2025, the cumulative gap between wages and prices has eroded purchasing power over time.
“From 2019 to 2024, the consumer price index rose 9.3 per cent, while nominal wages per worker grew just 7.2 per cent,” it said, adding that this effectively means Malaysians now have to work more hours to afford the same basket of goods.
The strain is particularly evident in food spending, where prices have risen faster than wages. B80 households needed 48 hours in 2024 to afford their monthly food expenditure, up from 44 hours in 2019, while T20 households saw an increase to 30 hours from 28 hours.
Lower-income groups remain more vulnerable, with B40 households allocating about 30 per cent of their income to food, compared with 22 per cent for M40 and 16 per cent for T20 households.
Despite some near-term relief — with wages rising 1.7 per cent against inflation of 1.4 per cent in 2025, supported by policy measures such as the minimum wage increase to RM1,700 — BNM cautioned that short-term gains are insufficient without deeper structural changes.
The central bank pointed out that Malaysia’s wage growth challenge is also tied to weak job quality, with high-skilled roles accounting for only 26 per cent of new jobs in 2025, below the 30 per cent average recorded between 2020 and 2024.
This reflects a slower transition to higher value-added industries, alongside muted technology adoption and low research and development investment.
Beyond job creation, BNM said Malaysia must strengthen the institutions that shape how wages are determined between employers and employees.
It noted that the minimum wage, introduced in 2013, has not proportionally lifted earnings for workers in the middle-income bracket.
“To support broader, more durable income growth, Malaysia will need to further develop its wage-setting institutions beyond the minimum wage,” it said.
Drawing on global practices, BNM highlighted mechanisms such as wage guidelines, living wage standards and coordinated wage-setting systems — including Japan’s Shunto model — as ways to better align wage growth with productivity, competitiveness and price stability.
At the same time, the central bank stressed the importance of supply-side reforms to keep inflation stable. This includes investing in infrastructure, strengthening research and development in high-growth sectors, and diversifying food import sources to reduce exposure to supply disruptions.
BNM also underscored the need to harness the “second demographic dividend” by boosting savings, productivity and human capital as the population ages.
Measures such as broader retirement savings coverage — including Employees Provident Fund (EPF) enrolment for gig workers and informal workers — are key to strengthening long-term financial resilience.
While such reforms may come at the cost of lower short-term consumption, BNM said they are necessary to build stronger income growth and reduce vulnerability over time.
“Income growth must outpace price increases, supported by structural reforms, stronger productivity and targeted fiscal support for vulnerable groups, or living standards could continue to erode over time,” it said.
