A
new study into the state of household income and consumption in Malaysia has
proposed that the government relook its methods to determine those who are most
in need of assistance. Think-tank Khazanah Research Institute (“KRI”) in its
latest study released last week suggested that the existing demarcations of
"B40, M40 and T20" household income levels should be readjusted to
represent the lowest 20 percent, middle 50 percent and top 30 percent of
households. KRI research director Suraya Ismail said their findings were based
on a new way of analysing data representing 6.67 million households surveyed in
the Department of Statistics 2014 Household Income and Expenditure Survey.
Unlike
current demarcations that placed all households earning below RM3,000 in the B40
category, Suraya said KRI's analysis used the concept of "equivalised
income" or a measure that takes into account of the differences in a
household's size and composition.
"There
will always be a B40. But in our analysis, we found that the most vulnerable is
the B20," said Suraya, co-author of KRI's "Demarcating Households: An
Integrated Income and Consumption Analysis" with researchers Hawati Abdul
Hamid and Gregory Ho.
"We
also found that the M40 does not reflect the characteristics of a middle-income
class.
"Instead,
we only found the middle-income or what we defined as an aspirational class in
the top 30 percent of the distribution," she said, adding that this would
explain the frustrations of households left out of various government policies
targeted towards existing lower-income households.
Based
on its consumption analysis, it was found that households that were only able
to fulfil their basic needs of food, housing and clothing tend to fall under
the bottom 20 percent category with an equivalised income of below RM1,196.
Meanwhile,
the top 30 percent is defined as households with the ability to consume a
diverse range of goods and services with minimal tradeoffs at an equivalised
income of above RM3,015.
Households
with an equivalised income of between RM1,196 and RM3,015 makes up the
middle-income range in KRI's study and it was found that there were many
similarities in consumption patterns to suggest that social policies by the
government will impact households beyond the existing B40 group.
"This
is an important message we want to get across to policymakers.”
"Like
what was explained earlier, if you spread your resources thinly to all B40, per
household, the results will not be as good as if you spread it to B20,"
said Soraya, who noted that there were already 2.6 million households defined
under the B40 category in 2014.
KRI
researcher Hawati said the new demarcation of household would entail a new
more-targeted policy approach by the government. "We are not advocating
entirely away from cash transfer," said Hawati, who explained that the
targeted approach could better identify groups, including women, the elderly
and persons with disabilities, beyond the current B40 income definition.
"The government is saying that the B40 group needs this (assistance) but
(the study found that) M40 also need similar assistance," she said.
Other
summary findings of the two-year study include the need for a more holistic
approach to improving living standards of households in the middle 50 percent
of the income distribution.
Perhaps,
it is also useful to examine the B10 or the “core poor” and T10 or the “core
rich” to examine requirements, measures to address and also create an
awareness. If presented well and documented properly, the T10 should step-in
directly to help the B10 without Government intervention by way of new taxes.
Government facilitates re-distribution by families and communities and it is “all
in kind” rather than cash. That way we have “real” people involved in helping
other “real” people. Stories of being lifted out of poverty then become encouragement
for others (including corporates) to be involved.
Reference:
Gov't
should relook income demarcation categories - new study, 23 Sept 2019,
MalaysiaKini
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