Malaysia’s Graduate Wage Crisis: A Persistent and Deepening Challenge
For Malaysia’s fresh graduates, the transition from university to the workforce is increasingly fraught with financial anxiety and career uncertainty. Despite years of study and rising educational attainment, a significant majority of new degree holders are entering the job market with salaries that barely cover basic living expenses. This phenomenon, often described as the “gaji cukup makan” (salary just enough for food) reality, has become a defining feature of the Malaysian graduate experience.
Recent reports and government data reveal that over 65% of fresh graduates in Malaysia earn less than RM3,000 (about US$700) per month, with many starting at salaries as low as RM1,000 to RM2,000. These figures have remained stubbornly stagnant for more than a decade, even as the cost of living, especially in urban centers like Kuala Lumpur and Penang, continues to rise. The result is a generation of young professionals struggling to achieve financial independence, repay student loans, and build meaningful careers.
How Widespread Is the Problem?
The scale of the issue is striking. According to the Ministry of Higher Education’s Graduate Tracer Study and the “Gaji Cukup Makan” Economy report by Future Studies Berhad, nearly two-thirds of fresh graduates—including those with bachelor’s, master’s, and even PhD degrees—start their careers earning less than RM3,000. The Ministry of Finance’s Economic Outlook Report 2025 further highlights that more than 50% of fresh graduates have been drawing starting salaries below RM2,000 for the past decade.
These low wages are not limited to a few unlucky individuals or specific fields. The problem cuts across disciplines, with even engineering and technology graduates—traditionally seen as high-demand sectors—reporting starting salaries just above RM1,000 in some cases. The wage gap between degree holders and those with only secondary education has also narrowed, reducing the financial incentive for pursuing higher education.
Compounding the issue, a large proportion of graduates are underemployed. Data from the Department of Statistics Malaysia and Khazanah Research Institute show that up to 70% of fresh graduates are working in semi-skilled or unskilled jobs, such as clerical, sales, or service roles, which do not require a university degree. In 2021, nearly half of all graduates were classified as overqualified for their positions, and only about 43% were employed in jobs that matched their qualifications.
Why Are Graduate Wages So Low?
The roots of Malaysia’s graduate wage crisis are complex and multifaceted. Several interrelated factors have contributed to the persistent problem of low starting pay and underemployment:
- Oversupply of Graduates: Malaysia’s higher education system has expanded rapidly, with tertiary enrollment multiplying more than 25 times since 1980. Each year, around 300,000 new graduates enter the job market, but only about 50,000 high-skilled, well-paying jobs are available. This oversupply intensifies competition and drives down starting salaries.
- Mismatch Between Education and Industry Needs: Many employers report that graduates lack the practical skills, industry exposure, and soft skills required for immediate employment. Outdated curricula and insufficient internships mean that academic qualifications do not always translate into job readiness.
- Stagnant Job Creation in High-Skilled Sectors: The Malaysian economy remains heavily reliant on low- and semi-skilled labor, with limited growth in high-value, knowledge-based industries. In 2022, only about a quarter of all jobs were classified as high-skilled, and the creation of new high-skilled roles has been sluggish.
- Wage Suppression and Market Dynamics: Employers often use the legal minimum wage as a benchmark for starting salaries, especially in microbusinesses and small enterprises that make up the bulk of the economy. This practice, combined with weak collective bargaining and limited labor protections, keeps wages low.
- Rising Cost of Living: While nominal wages have increased slightly, real wages—adjusted for inflation—have stagnated or even declined. The cost of living in urban areas far outpaces entry-level salaries, forcing many graduates to compromise on housing, nutrition, and lifestyle.
Personal Stories: The Human Impact of Low Graduate Wages
The statistics are sobering, but the personal stories behind them are even more telling. Andy Yap, a 23-year-old computer science graduate, spent four months job hunting and was repeatedly told that his expected salary of RM3,000 was “too much.” He eventually secured a software engineering job at RM4,000, but many of his peers with similar qualifications settled for jobs just above RM1,000.
Howard Ng, another recent graduate, earns about RM3,000 a month but finds it “barely enough” to cover rent and daily necessities. “A third of my salary goes to paying rent, the rest pays for daily necessities, especially food … thankfully I am not currently paying off student loans,” he shared. Others, like a physiotherapy graduate earning RM2,400, rely on family support to make ends meet.
These stories are echoed across the country, with many young professionals living paycheck to paycheck, unable to save, invest, or plan for the future. The financial strain is compounded by student debt, high rental costs, and the need to support family members.
Underemployment and Overqualification: Wasted Potential
One of the most troubling aspects of Malaysia’s graduate wage crisis is the high rate of underemployment and overqualification. According to Khazanah Research Institute, nearly half of all graduates in 2021 were working in jobs that did not require their level of education. This mismatch not only limits individual career progression but also represents a significant underutilization of the country’s human capital.
Many graduates accept low- or semi-skilled jobs simply to avoid unemployment, often facing a “wage penalty” for being overqualified. The prevalence of temporary, contract, or part-time work—classified as “non-standard employment”—has also increased, with more than half of graduates in 2021 lacking full-time, permanent positions. These jobs often come with irregular income and limited social protection, further exacerbating financial insecurity.
The consequences of underemployment are far-reaching. Graduates in mismatched roles report higher levels of dissatisfaction, burnout, and absenteeism. The lack of meaningful career paths and fair compensation can lead to disillusionment, mental health challenges, and a growing sense of frustration among the educated workforce.
Structural and Policy Factors: Why Hasn’t the Situation Improved?
Despite decades of economic growth and repeated policy interventions, Malaysia’s graduate wage crisis has proven remarkably persistent. Several structural and policy-related factors help explain why the problem has not been resolved:
- Economic Structure: Malaysia’s economy remains anchored in low-cost, labor-intensive industries, with a heavy reliance on foreign workers. This suppresses wage growth and discourages investment in automation, innovation, and skill development.
- Education-Industry Disconnect: The rapid expansion of higher education has not been matched by a corresponding increase in high-skilled job creation. Academic programs often lag behind industry needs, and there is insufficient collaboration between universities and employers.
- Weak Wage Governance: The absence of standard wage-setting guidelines and limited enforcement of labor laws allow employers to keep starting salaries low. The share of Compensation of Employees (CE) in Malaysia’s GDP remains below 35%, far lower than in developed economies.
- Inflation and Real Wage Erosion: While nominal wages have risen modestly, inflation has outpaced these gains, eroding purchasing power. For example, a fresh graduate’s salary of RM1,300 in 1984 is equivalent to RM7,000–RM8,000 today after adjusting for inflation, yet current starting salaries are only a fraction of that amount.
Consequences: Brain Drain, Inequality, and Social Risks
The implications of Malaysia’s graduate wage crisis extend far beyond individual hardship. Persistent underemployment and low pay threaten to undermine the country’s aspirations of becoming a high-income nation and building a knowledge-based economy.
One major concern is the growing “brain drain.” As opportunities for well-paying, skilled jobs remain limited at home, many of Malaysia’s best and brightest are seeking work abroad. As of 2022, nearly 1.9 million Malaysians had migrated overseas, with a significant proportion classified as skilled or semi-skilled workers. The exodus of talent not only depletes the country’s human capital but also hampers innovation and long-term economic growth.
Wage stagnation and underemployment also contribute to widening income inequality and social stratification. The diminishing returns to higher education may discourage future investment in human capital, especially among lower-income groups. Without meaningful reforms, Malaysia risks entrenching a cycle of low wages, wasted talent, and declining confidence in the value of education.
What Are the Solutions? Policy Proposals and the Road Ahead
Addressing Malaysia’s graduate wage crisis requires a comprehensive, multi-pronged approach involving government, educational institutions, employers, and graduates themselves. Experts and policymakers have proposed several strategies to tackle the root causes of low starting pay and underemployment:
- Education Reform: Universities and colleges must work closely with industry to ensure curricula are relevant and up-to-date. Greater emphasis should be placed on practical skills, internships, and industry exposure to prepare graduates for the demands of the modern workforce.
- High-Value Job Creation: The government should prioritize the development of high-impact industry ecosystems, such as semiconductors, clean energy, and biotechnology, to generate more high-skilled, well-paying jobs. Initiatives like the New Industrial Master Plan 2030 aim to create millions of new jobs, but their success will depend on effective implementation and investment.
- Wage Policy and Incentives: Introducing advisory wage guidelines, wage subsidies, or hiring grants for employers who recruit fresh graduates into high-skilled roles can help raise the wage floor and encourage fair compensation. These policies should be flexible, sector-specific, and tied to measurable outcomes like wage growth and workforce upskilling.
- Cost of Living Support: Measures such as housing allowances, rent control in urban areas, and tax incentives for employers can help alleviate financial pressures on young workers. Promoting remote work opportunities may also enable graduates to live in more affordable locations without sacrificing career prospects.
- Lifelong Learning and Reskilling: Continuous professional development, supported by government and industry, is essential to help graduates adapt to changing job market demands and advance their careers.
Ultimately, solving the graduate wage crisis will require a coordinated, whole-of-nation effort. As Arulkumar Singaraveloo, CEO of the Malaysia HR Forum, notes, “Persistent graduate underemployment risks creating a vicious cycle of low wages, wasted talent and declining confidence in higher education. Over time, this could widen inequality, push talent overseas and undermine Malaysia’s goal of becoming a high-income nation.”
In Summary
- Over 65% of Malaysia’s fresh graduates earn less than RM3,000 per month, with many starting at RM1,000–RM2,000—wages that have stagnated for over a decade.
- High rates of underemployment and overqualification mean that many graduates work in jobs that do not require their degrees, limiting career progression and financial stability.
- Key causes include an oversupply of graduates, mismatch between education and industry needs, slow growth in high-skilled job creation, and wage suppression by employers.
- The cost of living in urban areas far outpaces entry-level salaries, forcing many young professionals to compromise on housing, nutrition, and lifestyle.
- Persistent low wages and underemployment contribute to brain drain, income inequality, and declining confidence in the value of higher education.
- Experts call for comprehensive reforms: aligning education with industry, creating more high-value jobs, introducing wage policies and incentives, supporting cost of living, and promoting lifelong learning.
- Without decisive action, Malaysia risks entrenching a cycle of low wages, wasted talent, and stalled progress toward high-income status.
