In a sobering warning that has sent shockwaves across Malaysia, former Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim has laid bare a grim truth: real wages in Malaysia have declined by nearly threefold over the past 40 years, leaving an entire generation earning far less than what their parents once could.
Tan Sri Muhammad, a Harvard-educated economist who led BNM from 2016 to 2018, shared a striking personal comparison that underscores how far real income has fallen.
He recalled earning RM1,300 per month as a fresh graduate back in 1984, a decent wage at the time. Fast forward four decades, and today’s graduates, despite Malaysia’s economic growth and inflation, are starting their careers with salaries ranging from RM2,000 to RM3,000.
At first glance, it may seem like an improvement. But adjusted for inflation, estimated at 5% annually over the decades, those salaries should be closer to RM7,000 to RM8,000 just to maintain the same purchasing power.
Stuck in the Middle-Income Trap, With No Way Out?
According to the former BNM governor, Malaysia remains shackled by deep-rooted structural flaws. The economy has stagnated, failing to evolve beyond a middle-income status. Among the root causes?
- Overreliance on low-skilled foreign workers
- An outdated education system
- A failure to create high-value jobs
As of December 31, 2024, Malaysia’s labour force stood at 16.78 million, but 2.37 million (14%) are foreign workers. These workers, he noted, are mainly concentrated in 3D sectors (dirty, dangerous, and difficult) like plantations, construction, and domestic services.
“These workers are generally low-skilled and inexperienced, which makes them cheaper to hire and puts direct wage pressure on Malaysia’s low-income earners.”
Losing Our Talents to Other Countries
The situation is further worsened by brain drain. Highly trained professionals are migrating to Singapore, the Middle East, Australia, and New Zealand in search of better pay.
Even more concerning, the former BNM governor pointed out the growing number of Malaysians commuting daily to Singapore to work in manual labour roles, not high-skilled jobs.
“If Malaysia fails to transform its economic structure, we risk becoming a net exporter of labour rather than talent. One day, our children could end up working as domestic helpers abroad, and I wouldn’t be surprised if it happens.”
A Shrinking Middle Class
He also weighed in on the government’s proposed shift from the B40, M40, T20 income classification to B20, M50, T30. The rationale? The original B40 group may now represent up to 60% of the population, due to years of stagnant wages, especially after the Covid-19 pandemic.
“Many in the B40 group are living paycheck to paycheck, with no savings to fall back on.”
He reminisced about how, during his early career in the 1960s, he was able to buy a car six months into his job and a house after three years. That reality is now a distant dream for many Malaysians.
GDP Growth Is Misleading
The former BNM governor emphasised that focusing on GDP figures alone is deceptive.
“Gross Domestic Product figures are misleading. We need to focus on the job structure of the economy. What kinds of industries are we creating? Are they generating high-value employment? That’s the real measure of progress,” he stressed.
“We shouldn’t benchmark ourselves only against Asean or weaker economies. We should aim for high-performing economies and focus on creating quality jobs. That’s what matters.”
It’s Not Too Late, But We Must Act Boldly
Despite the grim warnings, he still believes Malaysia can reform and rise, just like China, Taiwan, South Korea, and Japan, which once lagged behind us in per capita income in the 1960s.
The former BNM governor who also played a key role in managing the 1997 Asian Financial Crisis, left readers with one final wake-up call: without bold structural reforms, Malaysia’s next generation may be worse off than the last.
Source: here
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