KUALA LUMPUR — As Malaysia prepares for Budget 2027, experts emphasize that middle-income households, known as the M40 group, require more comprehensive support beyond additional tax breaks to alleviate financial pressures. Rising costs in housing, food, transportation, healthcare, and education continue to strain these families, especially those balancing childcare with eldercare responsibilities.
Dr. Foo Lee Peng, chairperson of the Centre for Business and Policy Research at Tunku Abdul Rahman University of Management and Technology, highlighted the growing challenge faced by M40 households managing multiple financial commitments. She noted that families with children who have disabilities or learning difficulties often incur repeated expenses related to therapy, assessments, specialist education, and transport. According to Dr. Foo, while higher personal tax reliefs could provide some relief, their benefit eventually depends on a household’s tax liability. For example, a RM1,000 increase in deductions would only save RM110 for a taxpayer in the 11% marginal tax bracket and would offer negligible relief for those with low or no taxable income.
Given this, Dr. Foo argued that Budget 2027 should adopt a dual approach encompassing both enhanced tax reliefs and initiatives to lower essential costs in sectors such as healthcare, education, childcare, and eldercare. She emphasized that improved service provision could help caregivers remain employed despite the financial and time demands associated with caregiving.
Economist Dr. Geoffrey Williams recommended prioritizing income increases alongside cost reductions. He proposed introducing a RM200 monthly tax credit within the framework of the Progressive Wage model, estimating it would cost around RM3.6 billion annually and directly boost workers’ incomes. Williams also advocated raising the minimum wage to RM2,000, dismissing concerns that such a hike would unduly burden micro, small, and medium enterprises (MSMEs), pointing out that many already pay wages exceeding that level. In addition, he suggested replacing student loan schemes with direct grants, estimating the fiscal impact at about RM3 billion. To fund these measures, Williams proposed a 1% tax on electronic payments, which he projected could generate up to RM28.8 billion in revenue.
However, some experts caution that raising the minimum wage alone will not address deeper structural wage challenges. Professor Emeritus Datuk Dr. Zakariah Abdul Rashid described the minimum wage as a “safety floor” but stressed the need for a broader wage framework supported by progressive wage structures, increased productivity, and improved workforce skills. He warned that wage hikes without corresponding productivity improvements could elevate labour costs—especially in small businesses and non-tradable sectors like food and beverage—leading to higher consumer prices and eroding real wage gains through cost-push inflation.
Dr. Zakariah further stated that the longer-term solution involves helping small and micro enterprises enhance their technological capabilities, management practices, and capital intensity to generate more value per worker and sustain higher wages. While acknowledging that minimum wage adjustments are necessary, he emphasized that statutory floors alone are insufficient to resolve Malaysia’s wage challenges.