Should a degree guarantee RM7,000 a month?

The debate sparked by former Bank Negara governor Muhammad Ibrahim’s claim—that Malaysian fresh graduates today should be earning RM7,000–8,000 a month if wages had tracked inflation—is less about ideal pay than it is about a deeper structural divergence. His figure, based on a simplistic 5% annual inflation assumption, is directionally useful but economically misleading. What it surfaces, however, is a more pressing question: why has the perceived value of a degree collapsed—and what does that signal about Malaysia’s economic posture?

This isn’t a conversation about adjusting pay scales. It’s about recalibrating expectations, correcting market misreads, and facing the uncomfortable reality that the wage floor has not kept up with the qualification ceiling.

In 1984, holding a degree placed you in rarefied air. Only 4.8% of the Malaysian workforce had tertiary education, and with such scarcity came real pricing power. Graduates commanded three to four times the pay of peers with only primary or secondary education.

Fast forward to 2024: that same degree is no longer a signal of exceptionalism. It’s a minimum requirement in many sectors. With over 22% of the workforce now degree-qualified, and diploma/degree programs expanding faster than the labor market can absorb, the premium that once accompanied a university credential has structurally eroded.

This mirrors a global pattern seen in markets like the UK and the Gulf, where the credential inflation has outpaced real productivity growth or high-skill job creation. Education hasn’t devalued—but its exclusivity has.

Between 2020 and 2023, the number of graduates in Malaysia increased at an average of 4.8% annually, while the creation of high-skilled jobs trailed at just 2% a year. This growing mismatch is not just a statistical quirk—it’s a structural failing.

Many graduates are underemployed, often taking up roles in the gig economy or semi-skilled sectors simply to earn a living. According to the Khazanah Research Institute, nearly half of Malaysian graduates in recent years are overqualified for their current roles. The result? Frustration, low career satisfaction, and a weakening wage-growth trajectory.

This divergence echoes issues seen in parts of Southern Europe, where high youth unemployment and poor graduate absorption have created both political dissatisfaction and long-term economic drag. In contrast, economies like Singapore and the UAE have tried to tie higher education expansion more closely to sectoral demand forecasts and future skills pipelines.

While graduate salaries for those under 25 did grow by 6.5% annually between 2021 and 2023—surpassing older cohorts—that still only brought average fresh grad pay to RM2,242 a month. After deductions, it leaves little margin above the “decent living” benchmark of RM1,642, as defined by the statistics department.

More troubling is the narrowing financial cushion: at this level, even minor disruptions—car repairs, medical bills, a job gap—can destabilize an individual’s finances. And when education debt enters the picture, the break-even point for an individual’s investment in tertiary education continues to stretch further out.

Muhammad Ibrahim’s use of a 5% average inflation rate may seem like a reasonable proxy, but it ignores the nuance of Malaysia’s real inflation trajectory. The actual average from 1984–2023 was 2.4%. If we adjust his RM1,300 starting salary by that rate, we land closer to RM3,357/month—not RM7,000.

That’s an important recalibration, not to diminish graduates’ frustrations, but to anchor the debate in data. Inflation is not linear. Sectoral shifts, trade exposure, labor mobility, and cost-of-living volatility all influence wage dynamics in more complex ways.

This also shows the limits of historical salary benchmarking as a policy critique. The labor market of 2024 is not an extension of 1984—it’s an entirely different ecosystem.

Malaysia isn’t underpaying fresh grads because it has forgotten their worth. It’s underpaying them because the structural evolution of its economy hasn’t kept pace with the aspirations of its education pipeline. As long as credential supply outpaces high-value job creation, wage compression will persist—regardless of inflation math.

This is not a graduate salary problem. It’s a labor market strategy problem. The correction won’t come from adjusting payslips—it will come from reengineering the value chain to demand the skills we’re producing. In other words: wage reform without workforce redesign is just inflationary nostalgia.