The pay landscape for entry-level workers in Malaysia has undergone a quiet revolution. According to the PNB Research Institute, wage disparities between fresh hires with different levels of education have narrowed considerably – but not without unintended consequences for degree holders.

The findings, drawn from 26 years of private-sector wage data through the Malaysian Employers Federation Salary Survey (1997–2022), paint a picture of a labour market realigning itself. The most dramatic shift? The narrowing of the once-wide earnings gulf between low-qualified workers and their tertiary-educated counterparts.

Minimum wage lifts the floor for the least qualified

Those with lower academic qualifications, such as PMR (lower secondary) and SPM (upper secondary) certificate holders, have reaped the most benefit. Since the implementation of the minimum wage in 2012, the real median monthly wage for entry-level PMR holders grew by 64% over the decade – a far cry from the modest 19% growth seen in the ten years prior. SPM graduates experienced a similar boost, with real wage gains jumping to 37%, up from 10% in the preceding decade.

The policy has served as a rising tide lifting many boats, especially those previously stuck at the bottom of the wage ladder. What used to be a yawning gap in income between the least and more educated workers has now become more of a stepping stone.

Higher education’s fading wage premium

On the flip side, those who invested in higher education are seeing diminishing returns. Degree holders only managed a modest 5% increase in real wages, with some instances showing a dip of up to 3%. Master’s degree holders fared worse – their real wage growth turned negative, plunging by as much as 10%.

Once viewed as a sure-fire path to upward mobility, university qualifications no longer guarantee a hefty pay bump. The wage premium for degree holders over SPM graduates has steadily eroded – from 167% in 1997 to 128% in 2012, and just 67% by 2022. In other words, while higher education still pays, the bonus is shrinking fast.

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TVET graduates outpace academic diploma holders

Technical and Vocational Education and Training (TVET) diploma holders have quietly outperformed their academically inclined peers in terms of wage growth. Over the past decade, real wages for TVET holders increased by 14%, compared to a mere 2% for those with academic diplomas.

In 2012, TVET diploma holders earned RM1,300, trailing their academic counterparts who brought in RM1,500. Fast-forward to 2022, and the gap has nearly closed – TVET holders now earn RM1,800 compared to RM1,850 for academic diploma holders. This trend suggests that hands-on, job-ready skills are gaining traction in the market, as employers prioritise practical capability over paper credentials.

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Rethinking wage policy for long-term resilience

PNB Research argues that while the minimum wage policy has helped flatten wage inequality, it may have unintentionally blunted the incentive for higher education. In their view, this policy alone isn’t enough to ensure sustainable and inclusive income growth.

To future-proof the workforce and encourage meaningful career progression, the institute advocates for broader wage reforms. These include adopting a living wage policy, as well as implementing a progressive wage framework that ties salary increases to productivity and skill development.

Moreover, the study underscores the need for stronger institutions to mediate wage discussions. PNB Research is calling for more centralised and institutionalised wage bargaining mechanisms between employers and employees. They believe the government has a role to play – not as an enforcer, but as a facilitator, ensuring that both sides are equipped and ready to negotiate fair and forward-looking wage agreements.

Balancing equity and ambition

As Malaysia’s workforce evolves, the nation finds itself at a crossroads: how to keep lifting the floor without lowering the ceiling. The minimum wage has helped many rise from the margins, but to build a resilient and aspirational labour market, more nuanced solutions are needed.

The message to business and HR leaders is clear: wage policies must go beyond minimums. Investing in skill development, supporting transparent wage negotiations, and redefining the value of education in the workplace will be key to maintaining both equity and excellence in the years to come.