Report reveals slow salary growth for graduates since 1997
According to a report by the PNB Research Institute (PNBRI), titled Entry-Level Salary Trend in Malaysia: Insights from Private Sector Employment (1997–2022), while tertiary education still commands higher pay compared to secondary education, the wage gap has steadily narrowed.
"While there remains an 'education premium' for those with higher education qualifications compared to those without, this premium has been declining.
"In terms of growth, the median entry-level salary for tertiary qualification holders has declined the most over the 25-year period after adjusting for inflation, by 28 per cent (or -1.3 per cent annually) for master's degree holders and 10 per cent (or -0.4 per cent 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," the report revealed.
The report analysed entry-level salaries in Malaysia from 1997 to 2022, using data on employees without prior experience extracted from the Malaysian Employers Federation's Salary Survey.
The report added that there was also an increasing number of graduates forced to accept jobs for which they are overqualified, resulting in a wage penalty.
This mismatch often forces graduates to accept roles that underutilise their qualifications and undervalue their training.
"As a result, they experience a wage penalty, a reduction in earnings compared to what they could have earned in positions aligned with their qualifications.
"Overqualification concerns both diploma and bachelor's degree holders alike, but is more acute among diploma holders.
"In 2021, as high as 55 per cent of diploma holders and 44 per cent of degree holders were categorised as overqualified for the jobs they secured, often pushed into roles requiring skill levels below their training," it said.
While the minimum wage plays an important role in ensuring a basic standard of living, its impact on reducing wage inequality across education levels is limited, it said.
"This is especially true if wages for those with higher education are not increasing," it said, adding that the higher the qualification, the less the pay has grown over the last 2.5 decades.
It further explained that the median wage for diploma holders had grown the most, both annually and over the entire period, followed by graduates of other qualification levels in ascending order according to the Malaysian Qualifications Framework (MQF).
The report also highlighted that the median wage for master's degree holders among sampled entry-level employees had grown at a dismal rate of less than one per cent annually over the period, even before adjusting for inflation.
"This is lower than the median growth rate of 1.8 per cent annually for degree holders and 2.1 per cent annually for diploma holders.
"This provides early but pivotal evidence that there is a declining return to education in Malaysia, at least in the private sector," the report said.
It further revealed that between 2002 and 2022, wages for entry-level workers with lower education qualifications, such as PMR and SPM holders, grew faster than those of workers with higher education.
Although higher qualifications generally still lead to higher pay, the increase in starting salaries was more pronounced for those with lower education levels over the past two decades, it said.
"The median entry-level salary for secondary education grew the strongest over the 25 years after adjusting for inflation.
"The median entry-level wage for those entering the workforce rose by 89 per cent (or 2.6 per cent annually) for PMR holders and 44 per cent (or 1.5 per cent 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."
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