Malaysia’s Rising Cost of Living, Job Market Resilience, and the Wage Squeeze in 2025
Malaysia’s 2025 economy shows a resilient job market and moderate inflation, but rising living costs and sluggish wage growth are squeezing household incomes. Despite productivity gains, real wages have declined, leaving many Malaysians struggling as expenses outpace earnings.
Malaysia’s economic landscape in 2025 presents a paradox: while the job market shows signs of resilience and unemployment hovers near a decade-low, the cost of living is quietly climbing, and wages are failing to keep pace. This trio of trends is quietly reshaping the daily realities of Malaysians, especially those in the middle and lower-income brackets.
The Consumer Price Index (CPI), Malaysia’s key gauge of inflation, ticked up to 134.3 points in April 2025, marking a steady rise from previous months and continuing a long-term upward trajectory that began decades ago. Headline inflation has moderated to about 1.4%, a relatively tame figure compared to the spikes seen in 2022. However, beneath this calm surface, the cost of essentials such as education, housing, water, and electricity continues to inch upward, nudging up household expenses. Food and beverage inflation, while slightly easing to 2.3%, remains a significant pressure point for many families.
On the employment front, Malaysia is showing encouraging signs. The unemployment rate is projected to average around 3.2% in 2025, the lowest in years, buoyed by rising job vacancies in sectors like construction, agriculture, healthcare, and tourism. This reflects an economy that is adapting and recovering from recent global shocks with a steady demand for labor. The government’s recent minimum wage increase to RM1,700 per month aims to provide relief to low-income workers, benefiting over 1.5 million Malaysians. Yet, this increase, while welcome, is only a partial solution to deeper structural issues.
Job Market
The real concern lies in wage growth, or rather, the lack thereof. Despite productivity gains, nominal wages in the private sector have grown by only 7.9% over the past five years, lagging behind the nearly 10% rise in consumer prices during the same period. This gap has resulted in a 1.9% decline in real wages, effectively eroding purchasing power for many workers. Fresh graduates, for instance, are still earning salaries barely above RM2,000, far from the RM7,000 to RM8,000 range that experts say would reflect a fair adjustment for inflation and living costs.
This disconnect between productivity and wages signals a troubling trend. Businesses, cautious amid economic uncertainties and rising input costs, are reluctant to raise wages substantially. Meanwhile, households face mounting pressure as everyday expenses rise faster than incomes. The expanding sales and service tax (SST) and subsidy rationalisations expected later this year could further strain household budgets, especially for low- and middle-income groups.
In essence, Malaysia’s 2025 economic story is one of contrasts. The labour market is robust, and inflation remains moderate by historical standards, yet the squeeze on real incomes threatens to undermine the quality of life for many. Without urgent reforms to wage-setting mechanisms and labour policies, the risk is that more Malaysians will feel the pinch of rising costs without the relief of commensurate income growth.
The challenge ahead is clear: to ensure that economic growth translates into tangible benefits for all Malaysians, not just in jobs created but in wages earned and living standards sustained. Otherwise, the nation risks entrenching a cycle of wage stagnation amid rising costs—a recipe for widening inequality and social discontent in the years to come.
Kazi Mahmood