Government proposes yearly pay progression and sector-specific wage floors
The Economic Outlook 2027 report prioritises labour-intensive MSMEs, which accounted for around 93.7% of establishments but 51.1% of total wages in 2022.
The government has proposed a framework for annual pay advancement and wage floors for persistently low-paid sectors, according to the Economic Outlook 2027 report. Progression could reflect workers’ experience, skills, competency, responsibilities and productivity.
Any sectoral floor would have to meet the national minimum wage. The report also recommends expanding collective agreements to establish pay ladders for specific occupations. Malaysia’s minimum wage was raised from RM1,700 to RM2,000, as announced in Budget 2027.
The report identifies labour-intensive micro, small and medium enterprises (MSMEs) as the priority for wage reform. These businesses represented around 93.7% of establishments in 2022, while contributing 51.1% of total wages. It says their size and capacity constrain employee compensation despite their greater need for physical labour.
To help firms afford higher pay, the government proposes stepping up existing efforts to encourage MSME technology adoption, alongside policies to improve management and organisational capabilities. The report links sustainable wage gains to stronger productivity and a move into higher-value activities.
For workers outside MSMEs, sector-based minimum wages are proposed alongside the universal minimum wage, so that low-skilled workers’ pay better reflects sector productivity.
The report also calls for continued attention to Technical and Vocational Education and Training (TVET), reskilling and upskilling. It cites two initiatives introduced in 2023: the Progressive Wage Policy, a voluntary incentive for private employers to increase pay when employees undergo upskilling, and Academy in Industry, which provides on-the-job training.
