This paper investigates the impact of foreign labour on domestic manufacturing wages through a case study of Malaysia, a country where foreign labour immigration has played a key role in manufacturing growth over the past two decades.

The main focus of the paper is on an econometric analysis of the determinants of inter-industry variation in wage growth using a new panel dataset. The results suggest that wage growth is fundamentally embedded in the structure and performance of domestic manufacturing. There is evidence of a statistically significant negative impact of foreign labour on the growth of unskilled-worker wages, but the magnitude of the impact is rather small.