NADIRA (not her real name) works as a cleaner at a manufacturing company in Klang. The 24-year-old earns RM1,800 a month, sometimes slightly over RM2,000 with overtime.
But with the rising cost of living, she is worried it will not be enough for long.
“I’m saving to continue my studies, but more than half of my salary goes to groceries and bills, since I have to support my ageing parents. I appreciate the pay bump from the minimum wage increase, but I don’t think it will be enough in the long run.”
Nadira is among many minimum wage earners who, while grateful for the recent increase from RM1,500 to RM1,700 in February, are still struggling to make ends meet.
The revised wage still falls short of workers’ actual needs. It remains well below Bank Negara’s 2018 recommendation of a living wage of RM2,700 for a single individual in an urban area, specifically Kuala Lumpur.
The gap is also evident in the Employees Provident Fund’s Belanjawanku 2024/2025 guide – for example, the estimated budget for a single person relying on public transport in Kuala Lumpur is RM1,970 while in Alor Setar it’s about RM1,600 to cover basic expenses like rent, transport and food.
Employers, too, are under pressure as they try to balance rising operational costs while maintaining wage increases amid global economic uncertainties.
Still, experts and industry leaders say coordinated efforts between employers, industry groups and policymakers are key to making minimum wage increases sustainable.
“Their coordinated actions will help balance the goals of fair compensation for employees with the economic realities businesses face,” says Malaysian Employers Federation president Datuk Dr Syed Hussain Syed Husman.
Money in, money out
The minimum wage increase is a step in the right direction to help low-income workers cope with rising living costs, but its impact isn’t felt equally, says Universiti Sains Malaysia economics expert Prof Dr Saidatulakmal Mohd.
“In theory, it should provide some relief by giving households more income to cover basic needs, access education and take part more actively in the economy.
“After all, one of the main goals of minimum wage policies is to reduce poverty and narrow income gaps.
“However, the impact of a wage increase isn’t felt equally by everyone. For workers in the informal sector or those on short-term contracts, the risks are different. As businesses try to manage higher labour costs, some may choose to reduce staff or limit new hiring, especially in sectors with tight margins.”
Prof Dr Saidatulakmal: The impact of a wage increase isn’t felt equally by everyone.
Prof Saidatulakmal also points out that wage increases often coincide with rising operational costs – which are typically passed on to consumers.
“When wages go up, so do business costs, especially for labour-intensive industries. Often, these costs are passed down to consumers, which contributes to rising prices. While some of this inflation may be temporary, if not managed well, it can lead to more persistent cost increases over time.”
Syed Hussain says balancing fair wages with business sustainability is undoubtedly a challenging task.
“The recent increase in the minimum wage to RM1,700 brought significant concerns among employers, particularly in the MSME [micro, small and medium enterprises] sector. Many MSMEs fear that the elevated labour costs may strain operations, potentially leading to reduced hiring, job losses and challenges in adopting automation.”
He adds that businesses are already grappling with rising costs for raw materials, utilities, insurance, rent, wage reviews and social security coverage.
The United States’ 24% tariff hike on export goods is also creating more uncertainties, especially in manufacturing, logistics and supply chains.
“Input costs, supply chain volatility and increased utility prices have impacted operations, amid strong pressure to pay higher wages.
“At the same time, hospitality and retail sectors typically operate on lower margins and are labour-intensive. Passing increased costs to consumers risks pricing them out of a competitive market.
“Rising labour costs and staffing shortages are pushing many healthcare providers to the brink – especially smaller clinics and providers in smaller towns,” Syed Hussain says.
External effects and adaptation
For now, most businesses are adapting to the higher wage requirements while trying to maintain production costs and profitability.
Prof Saidatulakmal says many manufacturers are recalibrating pricing strategies, optimising costs and improving productivity to manage wage-related pressures.
“Price adjustments help firms transfer part of the increased labour costs to end consumers, while cost optimisation involves reviewing internal processes, reducing inefficiencies and renegotiating supply contracts.
“A key adaptation has been the increased use of automation and digital technologies. More businesses are adopting tools such as automated production systems, AI-driven inventory management and digital customer service platforms.
“These tools help reduce reliance on manual labour and offer scalability, especially in sectors sensitive to wage increases. This move has also been supported by the government through various incentives.”
In terms of hiring practices, she cites the recently released FMM Business Conditions Index (FMM BCI) survey involving 524 respondents nationwide.
“While 62% of respondents expect no change in workforce size, 22% plan to increase hiring, up from 18% previously. Notably, 16% foresee a reduction in employment, suggesting an underlying trend of sectoral restructuring and automation adoption in response to rising wage costs.”
Closing the gap
Still, there are ways to promote an equitable outcome for both employers and employees – including adapting creatively to higher wage costs without reducing the workforce. This involves improving productivity, leveraging technology and rethinking business models, says Syed Hussain.
Among manufacturers, measures include adopting robotics and artificial intelligence (AI)-driven systems to handle repetitive tasks, allowing workers to upskill into higher-value roles.
“The challenge is the high upfront investment. Government incentives such as Malaysia’s Penjana Kapital and Industry4WRD assist businesses in adopting new technologies.”
Some service-based firms like IT and consulting companies have shifted to hybrid work models, reducing overhead costs on office space and utilities while maintaining productivity.
“Adoption of a remote work policy requires strong digital infrastructure and management adaptation,” Syed Hussain says.
In the retail and F&B sectors, some MSMEs have introduced profit-sharing and bonus schemes tied to sales targets, aligning wage growth with business performance.
“Such policies require more transparent metrics and trust between employers and employees,” he says, noting that banking and logistics sectors also cross-train staff members to handle multiple roles such as customer service and digital operations to improve workforce versatility.
On potential adjustments to minimum wage policy, Iseas-Yusof Ishak Institute senior fellow Dr Lee Hwok Aun notes that Malaysia has oscillated between different structures – from a Peninsular vs Sabah-Sarawak split (2013-2019), to a nationwide flat rate (2019-2020), then an urban vs non-urban divide (2020-2022), and back to a single rate.
“I am in favour of a tiered structure that is more aligned with economic capacity and cost of living,” he says.
Additionally, Syed Hussain emphasises the need for productivity-linked wage systems and outlines key support measures to make them work.
“These include government incentives like tax breaks and training grants, public-private partnerships to fund automation and encouraging MSMEs to adopt digital tools such as HR tech and cloud accounting.”
Prof Saidatulakmal also highlights the long-term potential of a well-planned minimum wage policy.
“If increases are introduced gradually and supported by the right measures – like skills training, better job-matching services, targeted support for small businesses and policies that ease the cost of doing business – then we’re not just raising wages, we’re also helping to improve productivity and grow domestic demand. Over time, this creates a healthier and more inclusive economy.”
She adds that Malaysia must look beyond just fixing a wage floor.
“Other areas need attention too, including social protection, assistance for low-income households and programmes that ensure essential costs like food, transport and education are kept at acceptable levels.”
This article is part of a special report by Media in Arms, a media collaboration comprising five mainstream media outlets – Chinese newspaper Sin Chew Daily, Malay daily Sinar Harian, local news broadcaster Astro Awani, Tamil newspaper Malaysia Nanban and The Star – which got together in February 2022 to share resources and collaborate on diversified news content.
