Malaysia’s Progressive Wage Policy (PWP), introduced as a pilot programme in June 2024, has delivered a significant boost to median wages for entry-level and non-entry-level workers, according to the Economy Ministry. The initiative, designed to address wage stagnation and promote equitable income distribution, has increased monthly earnings by up to 13% for some participants, marking an encouraging start to a broader economic reform agenda under Prime Minister Datuk Seri Anwar Ibrahim.
In a statement to local media, the ministry reported that entry-level workers under the PWP now earn a median monthly salary of RM2,200, a rise of RM250 or 13% compared to the 2024 baseline of RM1,950. For non-entry-level employees, the median wage has increased by 9%, or RM200, to RM2,400 per month. These figures, while modest in absolute terms, represent a meaningful step towards narrowing income disparities in a country where low-wage workers have long struggled with rising living costs.
The PWP targets employees earning between RM1,500 and RM4,999 monthly, a bracket that encompasses a significant portion of Malaysia’s workforce. As part of the pilot, the government allocated RM50 million to incentivise participating companies, offering up to RM200 per month per entry-level employee and RM300 per non-entry-level worker. With the programme set to expand in 2025, backed by a RM200 million budget to benefit 50,000 workers, the policy could become a cornerstone of Malaysia’s economic strategy. 
A Pilot with Promising Results
The pilot phase, which ran from June 2024, attracted 756 employers, representing 76% of the initial target of 1,000 employees. Of these, 359 employers—or 47%—raised wages in line with the programme’s guidelines. Additionally, 43% of those who increased wages also provided training for their staff, with 1,307 employees completing at least 21 hours of upskilling. This dual focus on wage growth and skills development underscores the policy’s aim to create sustainable improvements in workers’ livelihoods.
“Employees and employers appear to have welcomed the government’s move to introduce the PWP on a voluntary basis,” the Economy Ministry noted, highlighting positive feedback from both sides. The voluntary nature of the programme, coupled with financial incentives, seems to have encouraged participation without imposing undue burdens on businesses. For employers to qualify for incentives, they must ensure a minimum of 21 hours of annual training for employees, or alternatively, facilitate skills recognition through the Recognition of Prior Learning (RPL) method.
The government plans to maintain the same implementation mechanism for the full rollout in 2025, with incentives available for three years until December 2027. Roadshows scheduled between February and April this year will provide further opportunities for employers to register and learn about the programme. While the PWP excludes certain sectors—such as civil service, defence, social security firms, family-run businesses, and diplomatic activities—it remains open to a wide range of industries, potentially broadening its impact.
Economic Context and Challenges
Malaysia’s adoption of the PWP comes at a time of heightened focus on economic equity across South East Asia. The region, while experiencing rapid growth in some areas, continues to grapple with income inequality and labour market disparities. In Malaysia, where the cost of living has outpaced wage growth for many low-income workers, policies like the PWP are seen as critical to ensuring that economic progress benefits a wider segment of society.
The policy also aligns with broader reforms championed by Prime Minister Anwar Ibrahim, who has prioritised social justice and economic restructuring since taking office. During the Budget 2025 announcement, Anwar confirmed the full implementation of the PWP, framing it as part of a larger vision to uplift workers and stimulate domestic consumption. With a target of reaching 50,000 employees this year, the government hopes to create a ripple effect, encouraging more companies to adopt fair wage practices voluntarily.
However, challenges remain. While the initial wage increases are promising, the increments of RM200 to RM250 per month may not fully address the financial pressures faced by workers in urban centres like Kuala Lumpur or Petaling Jaya, where housing and transport costs are high. Critics have also pointed out that the programme’s voluntary nature could limit its reach, as some employers may opt out if they perceive the training requirements or wage adjustments as too costly. If participation rates stagnate, the PWP’s impact on national wage standards could be constrained.
Moreover, the long-term sustainability of funding incentives is uncertain. The current budget of RM200 million for 2025 is substantial, but as the programme scales, additional resources will be needed to maintain momentum. Without a clear plan to transition from government subsidies to market-driven wage growth, there is a risk that the PWP could become a temporary fix rather than a structural solution.
Regional Implications and Comparative Analysis
Malaysia’s PWP offers a potential model for other South East Asian nations facing similar wage and inequality challenges. In neighbouring Thailand, for instance, minimum wage policies have been a contentious issue, with periodic hikes often met with resistance from businesses. Vietnam, meanwhile, has implemented labour reforms to attract foreign investment, but wage growth for low-skilled workers remains uneven. Malaysia’s emphasis on voluntary participation and incentives could provide a middle ground, balancing employer flexibility with worker benefits.
If the PWP succeeds in sustaining wage growth without undermining business competitiveness, it may encourage regional policymakers to explore similar frameworks. However, cultural and economic differences across South East Asia mean that a one-size-fits-all approach is unlikely. Malaysia’s relatively diversified economy and stable political environment provide a conducive backdrop for such experiments, whereas countries with less institutional capacity might struggle to replicate the model.
Public and Employer Sentiment
Early indications suggest that the PWP has been well-received. The Economy Ministry’s assertion that both employees and employers have responded positively points to a collaborative spirit that could drive the programme’s success. Workers, particularly those in entry-level roles, stand to gain not only from higher wages but also from training opportunities that enhance their employability. For employers, the financial incentives and potential for a more skilled workforce offer tangible benefits, even if compliance with training requirements demands additional effort.
Nevertheless, the government will need to monitor sentiment closely as the programme expands. Resistance from smaller businesses, which may lack the resources to meet training or wage guidelines, could emerge as a sticking point. Addressing these concerns through targeted support—such as subsidies for training costs or flexibility in implementation—will be crucial to maintaining broad-based support.
Looking Ahead: A Step Towards Equity?
The Progressive Wage Policy represents a cautious but meaningful step towards addressing wage stagnation in Malaysia. While the pilot results are encouraging, the true test lies in the programme’s ability to scale effectively and deliver lasting change. If the government can sustain funding, broaden participation, and ensure that wage increases keep pace with inflation, the PWP could reshape Malaysia’s labour market for the better.
For now, the policy’s early success offers a glimmer of hope for low-wage workers and a potential blueprint for economic reform. As the full rollout unfolds in 2025, all eyes will be on whether Malaysia can translate these initial gains into a broader movement for equity and prosperity. With regional peers watching closely, the PWP’s trajectory could influence labour policies across South East Asia, marking a pivotal moment in the region’s economic evolution.
