Farhana Roslan
Head of the Research Team
Farhana currently heads the Research Team at PNBRI. Her research interests include the political economy, particularly the intersection of business and government, as well as labour market institutions in market economies. Farhana spent seven years in investment research before pivoting into public policy, with stints in the federal government and the United Nations Development Program. She holds a Bachelor of Science in Accounting and Finance from the London School of Economics and a Master of Public Policy from the John F. Kennedy School of Government, Harvard University.
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Anis Farhana Amran
Research Associate
Anis is a Research Associate at PNBRI. Her research interests lie in education equity and gender inequalities, particularly how structural barriers intersect to shape access to opportunity. She is especially interested in how these dynamics influence education-to-labour market transitions and broader questions of inclusive development. She holds a BA in Philosophy, Politics and Economics from the University of Southampton. Anis aspires to contribute towards a Malaysia that nurtures and uplifts diverse talents, paving the way for all to realise their potential.
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Dr. Ahmad Farhan Roslan
Senior Research Associate
Dr. Farhan is a Senior Research Associate at PNBRI. He holds a PhD in Built Environment from the University of Salford, where he studied urban resilience, climate change, and disaster risk reduction. His previous work centred on digital transformation in engineering and the built environment, an area in which he is particularly passionate. With experience in academia and industry on local and international research projects, he is highly adept at translating research findings into practical recommendations. He aspires to improve the built environment in ways that benefit society and the country.
[email protected]Abstract
This discussion paper explores whether today’s entry-level employees in Malaysia’s private sector are significantly better off than those who entered the workforce 25 years ago, accounting for education level and inflation. Using data from 26 editions of the Malaysian Employers Federation’s (MEF) Salary Survey (1997–2022), the study provides one of the most comprehensive long-term analyses of private sector entry-level salaries in the country, covering tertiary, secondary, and Technical and Vocational Education and Training (TVET) graduates. Findings reveal that real wage growth has been largely stagnant, with inflation-adjusted salaries for higher-educated employees declining over time. Three major trends are identified: (i) minimum wage implementation has improved wage growth for lower-qualified employees; (ii) the wage premium for higher education has shrunk; and (iii) while TVET graduates continue to earn slightly less in absolute terms, their wages have grown faster than those of their academic counterparts, narrowing the gap. These trends carry important implications for wage policies, the value of higher education, and the role of TVET in shaping future labour market outcomes.
Executive Summary
This report analysed entry-level salaries in Malaysia from 1997 to 2022 utilising data of “employees without prior experience” extracted from the MEF Salary Survey, which is available for purchase by the public on its website. The survey is conducted annually among member companies of the Malaysian Employers Federation (“MEF”).
PNB Research Institute (PNBRI) aimed to understand if new entrants to the Malaysian labour market are doing significantly better compared to their predecessors. To that end, the PNBRI team scrutinised salaries from the educational dimension, as reported in the annual MEF Salary Survey for Executives and Non Executives among their member companies. The survey provided valuable data over 25 years, enabling us to conduct simple time series analyses of entry-level salaries.
Consistent with the literature, our study found that wages for new entrants to the Malaysian labour market within the private sector (using the respondents to this survey as the sample) have broadly not changed compared to their predecessors more than two decades ago. However, several positive developments were also found in this sample.
In summary, we uncovered the following promising and worrying trends:
1. The minimum wage has reduced wage inequality across education levels
• At the entry-level, there was a positive relationship between the qualification level and the salary level of the median employee. It was found that “the higher the qualification, the higher the pay” expectation was true and appeared consistent throughout the period of study from 1997 to 2022.
• In addition, comparing the periods 2002 to 2012 and 2012 to 2022, it was found that “the lower the education level at the point of entering the job market, the more the entry level wage has grown”. However, this growth rate mostly doubled across all qualification levels after the minimum wage legislation.
• In terms of growth, the median entry-level salary for secondary education had grown the strongest over the 25 years after adjusting for inflation. The median entry-level wage for those entering the workforce grew 89% (or 2.6% annually) for PMR holders and 44% (or 1.5% annually) for SPM holders.
• In other words, the median entry-level PMR holder entering the private sector for the first time in 2022 was earning almost twice as much as her counterpart in 1997, in real terms.
• The question left to bear is whether the inequality of wages between those with higher education levels and those without is the kind that should be reduced. Such a phenomenon may speak for the declining interest in higher education recently observed in Malaysia. In 2019, as high as 72.1% of SPM leavers did not wish to pursue tertiary education (Wong 2022).
2. There appear to be signs of shrinking returns to education in the Malaysian private sector
• While there remains an ‘education premium’ (in Ringgit Malaysia terms) for those with higher education qualifications compared to those without, this premium had been declining.
• In 1997, the median basic degree holder used to earn 2.7 times more than the SPM holder. By 2022, the median basic degree holder earned only 1.7 times more than the SPM holder.
• In terms of growth, the median entry-level salary for tertiary qualification holders had declined the most over the 25-year period after adjusting for inflation, by 28% (or -1.3% annually) for master’s degree holders and 10% (or -0.4% annually) for bachelor’s degree holders.
• In other words, the median fresh graduate with a master’s degree entering the private sector for the first time in 2022 effectively earned almost one-third less than her counterpart in 1997, in real terms.
• Again, while the role of the minimum wage is important in at least providing the bare minimum for livelihood, its effects in reducing wage inequality across education levels may not exactly be the kind of distributive improvement that is envisioned, especially if wages at the higher education level are not growing.
3. Academic graduates still earn more, but TVET is catching up
• The entry-level salary of TVET qualification holders grew faster in real terms compared to that of non-TVET (“academic”) qualification holders, but they still earn less in absolute terms. This is true across all TVET qualification levels – from post-secondary to technical certificates that are equivalised to a bachelor’s degree.
• Across the decade from 2012 to 2022, the academic bachelor’s degree holder had consistently been earning about 1.4 times more than the (TVET) technical institute certificate holder. During the same period, the academic diploma graduate had also consistently been earning 1.1 times more than the TVET diploma (DKM Level 4) graduate.
• In terms of growth, the median entry-level salary for tertiary qualification holders had declined the most over the 25-year period after adjusting for inflation, by 28% (or -1.3% annually) for master’s degree holders and 10% (or -0.4% annually) for bachelor’s degree holders.
• In other words, the median fresh graduate with a master’s degree entering the private sector for the first time in 2022 effectively earned almost one-third less than her counterpart in 1997, in real terms.
• In terms of growth, after adjusting for inflation, the median entry-level wage for a TVET diploma (DKM Level 4) graduate grew stronger by 14% (or 1.3% annually) between 2012 and 2022, compared a mere 2% (or 0.2% annually) growth in that of an academic diploma holder.