Write an article about Should fresh grads be earning RM7,000-RM8,000 a month? .Organize the content with appropriate headings and subheadings (h1, h2, h3, h4, h5, h6), Retain any existing tags from Imagine being new to the job market and earning up to RM8,000 a month – that’s a scenario an overwhelming majority of fresh graduates can only dream of.
PETALING JAYA: Early last month, former Bank Negara governor Muhammad Ibrahim was reported to have said the real salaries of fresh graduates in Malaysia have gone down threefold in 40 years.
Based on his reckoning, present-day fresh grads should be paid RM7,000-RM8,000 per month. But is this realistic, given the state of today’s job market?
First, a quick lesson in economics. There is inflation every year. If you spent RM400 per month on groceries last year, you will probably spend about RM407 a month this year, based on prices going up by 1.8% – the 2024 inflation rate.
Accordingly, your salary should go up by 1.8% or more to counter the rise in prices and maintain your ability to pay for things.
You might have heard your parents talking about their salaries being very low in the past – perhaps about RM300 a month. But the prices of everyday things were also much lower back then.
For example, they might have spent RM60 a month on groceries. If you earn about RM2,000 today and spend about RM400 on groceries monthly, you would technically be in the same position as your parents had been, in that you spend about 20% of your salary on groceries.
So, here are five things to consider when it comes to the issue of fresh grads’ salaries in 2024/2025.
1. Starting pay in 1984 vs 2024
In 1984, Muhammad started out with a salary of RM1,300 per month. His argument takes into account an inflation rate of 5% every year since then.
Fresh grads currently earn between RM2,000 and RM3,000 monthly – about one-third of what Muhammad suggests it should be. But contextually, his starting pay in 1984 was not the average salary for a fresh grad back then. In fact, RM1,300 a month was very high!
Muhammad Ibrahim.
In 1984, the average salary for Malaysians was RM228 a month. This would place someone who earned RM1,300 a month within the top 1% of income earners back then.
The inflation rate of 5% is also too high. According to Macrotrends, inflation in Malaysia averaged 2.4% from 1984 to 2023. Using this as a guide, a monthly salary of RM1,300 in 1984 would equate to RM3,357 in 2024.
2. Fewer university graduates in 1984
The state of the job market in 1984 and 2024 is very different. Back then only 4.8% of Malaysian workers had a university education, in contrast with 22% last year, according to the statistics department.
In fact, many workers in the ’80s didn’t even complete their primary education, with only 35% having only done so. As such, comparing graduate salaries between the two eras is not so straightforward.
Those who had graduated from university in 1984 would have been paid circa RM720 a month, about three to four times higher than those who only had primary (RM180 a month), junior secondary (RM190), or senior secondary (RM276) education.
3. Lower returns from tertiary education
In 1984, it wasn’t commonplace for most employees to have a university degree: it took a lot of determination, effort, education opportunities, and financial privileges to obtain one. So, when you graduated, it meant something in the job market.
But today, a university degree is the norm – in fact, for most jobs, a basic requirement. This also means it’s harder to differentiate yourself in the job market.
As of 2023, Malaysians with a tertiary education earned an average of RM4,700 a month, while those who had a secondary education earned roughly RM2,535.
Many Malaysians end up taking out loans to acquire a diploma or degree; and while graduates do indeed get a higher pay on average, this return has been getting lower and lower.
And with education getting more expensive, Malaysians are increasingly finding it hard to repay their student loans with their current salaries as they are considered overqualified and underemployed, according to the Khazanah Research Institute.
Due to being overqualified, many fresh grads have to settle for semi- or low-skilled jobs, or move into the gig economy, to make ends meet.
4. Mismatch between education and job market
One thing Muhammad said that is generally correct is that Malaysia has not been able to create enough high-skilled jobs for local grads.
According to this research paper, the gap between the number of graduates and high-skill jobs is widening. And the Khazanah Research Institute claims that as of 2021, close to half of graduates are overqualified and have to settle for semi- or low-skilled jobs, or move into the gig economy, to make ends meet.
Furthermore, according to the statistics department, the number of graduates between 2020 and 2023 grew by an annual average of 4.8%, versus only a 2% yearly growth in high-skilled jobs.
5. Graduate salaries have grown, but…
The department of statistics has further shown that graduate salaries for workers below age 25 grew the most from 2021 to 2023, at an average annual rate of 6.5%. This is higher than that of workers aged 25-34 (4.2% growth on average); 35-44 (2.8%), and above 45 (3.2%).
Thanks to this growth, the average salary for fresh grads as of 2023 is estimated to be RM2,242 a month. But is this enough?
The answer to that question depends on a person’s choices and lifestyle, with the statistics department estimating that a Malaysian who is single will need to spend RM1,642 a month to enjoy “decent living”.
After deducting EPF, Socso and taxes, a fresh-graduate salary today comes up to about RM1,977 per month – which leaves them with quite a small margin to survive on if anything goes wrong.
The bottom line is, a starting salary of RM7,000-RM8,000 is certainly desirable but, in light of the considerations above, far from realistic. Alas, it is a scenario an overwhelming majority of fresh graduates can only dream of.
This article was originally written by Su-Wei Ho for MyPF. To simplify and grow your personal finances, follow MyPF on Facebook and Instagram.
Read more articles from MyPF here.
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