Cost of Living and Standard of Living: The Difference

 

At a recent class reunion, some classmates wanted to understand what’s the difference between the cost of living and standard of living and how much is required to survive after retirement. 

So, if a person migrates or decides to relocate to another city, the first thing that comes to his/her mind is how much money is required to fulfil the necessities of life there. In this context, there are two basic economic concepts, i.e. Cost of living and Standard of living, which gives you an idea of the general price level in an area and the degree of wealth and luxuries, that a particular group enjoy, respectively.

 

 

There are instances when people often misinterpret these two and use them interchangeably, but they are very different from one another. Cost of living is nothing but the cost of subsistence, i.e. the expense that people incur to live in a geographical location. Conversely, the standard of living refers to the level of material comfort possessed by an individual or a group in society. 

In this article excerpt, you may understand the differences between cost of living and standard of living. 

Comparison Chart

Basis for Comparison	Cost of Living	Standard of Living
Meaning	Cost of living implies the general level of prices of the goods and services which a common man can afford, for his regular needs.	Standard of living refers to the level of money and well-being, that people enjoy in a particular country.
Measures	How expensive it is to survive in a place, in comparison to another.	How well the people of a particular class live, without compromising their needs and wants.
Linked to	Wages	Quality of life
Indicators	Cost of living index and Purchasing Power Parity	Real income per person and poverty rate.

Definition of Cost of Living 

Cost of Living refers to the amount of money required to maintain a minimum standard of living, by being able to afford the necessities of life such as food, clothing, shelter, transportation, telephone and internet, recreation, education, healthcare, taxes and other utilities. It determines what amount you pay, for availing the necessary items and amenities.

With the help of cost of living, one can easily make a comparison between one place to another, as it differs from area to area and also changes over time, i.e. advancement of technology, modernisation and industrialisation lead to the increase in the cost of living. 

Cost of living is measured by ascertaining the average cost of the basket of goods and services which are essential for livelihood, for the people living in that area. 

Some countries with the highest cost of living are Bermuda, Switzerland, the Bahamas, Norway, Denmark, Iceland, Luxembourg, Singapore, etc. 

Definition of Standard of Living 

Standard of Living, as the name suggests is the degree to which a particular socio-economic class can avail the wealth, comfort and material items, in a particular area. It is used to determine the relative prosperity of a demographic group in a country. 

The standard of living of a family or residents of the region basically depends on several factors like income, employment rate, poverty rate, quality of education and healthcare, religious and social freedom, level of crime, rate of inflation, infrastructure, life expectancy, economic and political stability, etc. 

To sum up, the cost of living indicates the amount of money required to maintain the minimum level of subsistence, by affording the necessities of life. As against, the standard of living ascertains the degree of subsistence of a socio-economic group as regards the sufficiency of needs and comforts in the day to day life. 

For Malaysia, the overall cost of living is low compared to Western countries. It is about 40% to 50% cheaper than living in the US or the UK. A family of four could survive on RM8,000 per month without rent. Average local salary is RM4,000 per month. That suggests at least two members of the family are working adults. If it is on standard of living, it is probably dependent on lifestyle and some may require RM15,000 – RM 20,000 per month! 

Reference:

Difference Between Cost of Living and Standard of Living, by Key Differences

Toxic Haze Over 25 Years!

 

The recurring haze in Southeast Asia persists because of unchecked slash-and-burn land clearing, highly flammable drained peatlands, and weak cross-border enforcement laws that have failed to stop corporate burning over the past 25 years:

 

·  Slash-and-burn clearing: Farmers and plantation companies use fast, cheap fires to clear tropical forests for oil palm and paper pulp.

·   Peatland destruction: Draining water from underground peat swamps dries out centuries-old carbon stores, turning them into deep, smoky underground fires that are very hard to put out.

·   El Niño weather cycles: Periodic dry, hot weather patterns worsen droughts, allowing fires to spread rapidly across Sumatra and Borneo.

 

Source: https://en.wikipedia.org

The problem continues because:

 

·                     Lack of strict enforcement: Agreements like the ASEAN Agreement on Transboundary Haze Pollution rely on national sovereignty and consensus, meaning there are no regional fines or cross-border prosecution powers against guilty companies.

·                     High profit margins: The immense financial value of commodities like palm oil incentivizes repeated land development despite seasonal bans 

Many of the ongoing fires have been burning across Sumatra and Indonesian Borneo since mid-July – underpinned by a so-called Super El Niño that is exacerbating drought conditions. Between July and August, Indonesia's Health Ministry recorded over 50,000 cases of respiratory infections linked to land and forest fires. More than 12,000 of those cases are of children under the age of five. Malaysia, meanwhile, has reported rising cases of asthma and conjunctivitis amid worsening air quality nationwide as smoke continues to drift across the border.

Today, large-scale fires are often associated with the expansion of industrial plantations and other commercial land use. Environmental groups, researchers, and government investigations have repeatedly alleged that some companies use fire as a cheap and effective way to clear vast areas of land. What makes Indonesian Borneo's wildfires particularly worrying is that they are burning through one of the world's largest tropical peatland ecosystems. Under normal conditions, these peatlands serve as gigantic carbon reservoirs. But under abnormal conditions, such as those currently hitting the region, they can become carbon "bombs". 

The prolonged transboundary haze is costing Malaysia between RM20 million and RM50 million daily in economic disruptions, soaring healthcare bills, and lost worker productivity, according to experts. The hardest-hit sectors are tourism and aviation. Air pollution can cut arrivals by up to 8%, with GDP losses up to RM1.5 billon a month. 

Why can’t there be solutions? For 25 years people have suffered. Can’t the authorities bring to book the companies and their directors. What’s the purpose of ASEAN if you can’t solve a 25-year-old problem? An ASEAN people movement must move these governments to find lasting solutions!

References:

Toxic wildfire haze spreads across Southeast Asia as 'super' El Niño intensifies, BBC Indonesian, Gavin Butler and Virma Simonette, 3 September 2026 

Economic toll of haze in Malaysia could hit RM1.5b a month as business and health costs mount, experts say, Malay Mail, 14 October 2026

Idiots, Tribal and Citizens

 

The above is differentiated by notable sociologists and public intellectuals. The pioneers who identified and stated these categories were founders of democracy in ancient Greece. Greek people, as we know, contributed to forming the modern civilized world in many ways. Greeks believed: - 

1.The first kind of people is idiots. They are not mentally deficient, but they are those who are totally self-centred. The ‘idiots’ always run for the private gains and personal interest. They have no public philosophy, no knowledge, no skill, no character and no virtue to contribute to  society. Such people always look out for personal pleasure and treasure. They are supported by like-minded politicians, foreign powers and elites of the society for their vested interest. The classic persons you may know but the dead ones include Hitler, Stalin and others. 

2.Tribal people follow tribalistic philosophy, but they do not necessarily belong to that specific tribe or society. Such people cannot think beyond the interest of their small tribe or group. For them, their primary religion is their tribe and tribalism is their god. They generally view everything from their own prism and interpret it in their own way. They are always suspicious and fearful of others. They tend to respond to rest of the people with intimidation, force and violence. The ideal persons for the tribal people are the warriors. The best examples of these people are those in certain fascist-like political parties with cult-like leadership. 

3.The third category is citizens. For ancient Greeks, citizens are those who have the skills and knowledge to live respectable public lives, who know the value of commonwealth as well as their rights and responsibilities towards the society. In other words, they help to form a civilized society. These are people in Denmark, Sweden, Norway or Ireland. 

So, what are we in Malaysia?

  

Reference:

Dr. Kethoser Kevichusa talked about “The Idiot, The Tribes people [Tribalistic mentality], & The Citizen [for a civilized society]”, ERITREANCDM, 24 November 2019

 

Overview of Budget 2027

 

Significant Points:

 

·        Total Allocation & Spending: Budget 2027 sets a total federal expenditure of RM510 billion (with an actual federal government outlay of RM459.8 billion), splitting into RM376.8 billion in operating expenditure and RM83 billion in development expenditure.

 

·     Revenue Projections: Government revenue is projected to grow by 4.7% to RM380.8 billion, supported by dividends (such as RM32 billion from Petronas) and expanding tax bases.

Source: https://belanjawan.mof.gov.my/ms/cadangan2027

 

·       Fiscal Deficit Targets: The government aims to narrow the fiscal deficit further to 3.3% of GDP in 2027 (down from 3.6% in 2026), balancing growth support with fiscal consolidation.

 

·    Subsidies and Social Support: Allocations for subsidies, social assistance, and incentives exceed RM80 billion (including RM40 billion designated for fuel subsidies) to shield households from high living costs.

 

·        Strategic Growth Sectors: Development spending prioritizes the economic sector (45.4%), followed by social services (33.7%), security (14.7%), and general administration (6.2%), with heavy emphasis on AI, green technology, and digitalization.

 

Review of a Budget: 

A brief review evaluates whether a budget achieves its stated goals sustainably, equitably, and realistically:

 

·       Rigidity in Operating Expenditure: A high share of operating expenditure goes toward mandatory and fixed items (emoluments, retirement charges, and debt service charges), leaving less fiscal space for agile crisis response.

 

·      Subsidy Burden vs. Targeting: While massive subsidy allocations (over RM80 billion) protect the Rakyat (citizens) from immediate inflation, broad or fuel-heavy subsidies can strain public finances compared to more precisely targeted cash transfers.

 

·      Macroeconomic Vulnerabilities: Growth projections (4.2%–5.2% for 2027) and revenue estimates rely heavily on external commodity prices, global semiconductor/AI demand, and regional stability. Weaker-than-expected external trade could trigger revenue shortfalls.

 

·       Fiscal Consolidation Trade-offs: Narrowing the deficit to 3.3% requires strict expenditure efficiency and leak-reduction (such as e-invoicing and subsidy rationalization), which can face execution bottlenecks or lag in administrative impact. 

Dr Lim Teck Ghee, economic historian has suggested a cut of 10% of the operating budgets of 500 GLCs and statutory bodies. Take the savings and put it into healthcare, housing, and social welfare. Dr. Lim estimates that abuses, leakages and mismanagement in public procurement cost this country between RM40 billion and RM60 billion annually. Procurement is about 40% of government spending, upwards of RM150 billion a year. It is, in Dr. Lim’s words, the sector most heavily hit by systemic financial loss and corrupt practices.

However, above it all, nothing was based on Reformasi. PMX could have introduced measures or bills to reform the corrupt affairs of the state. Like what?  He announced the idea of a legal reform commission, but he didn’t mention a RCI for all the shenanigans over the last 15 years – Felda, LCS, Feedlot, Jana Wibawa, Sabah Water Department and many more (beyond 1MDB and Tabung Haji). Malaysia ranks 54 out of 182 countries in Transparency International’s 2025 Corruption Perception Index. This would have been a bold move to assuage the sentiment of the ordinary rakyat. But alas, you must not spook friends in the Cabinet.

Reference:

Opinion: RM60 billion money disappearing trick and calling it a GLC, Nganasegaran, newswav.com, 14 October 2026 

Tuition Centre Owners Told to Find Bumi Partners By 2027?

 

Recently, the Ministry of Education (KPM) embedded a 30% Bumiputera equity requirement into private education centre registration rules. For many Malaysian Chinese-owned tuition centres that have operated legally for decades, this is traumatic. The Ministry of Education (KPM) has now clarified that existing tuition centres that do not meet a 30% Bumiputera equity threshold will not be denied registration renewal from 2027.

 

For tuition centres specifically, the rules go further: foreign equity is prohibited entirely. Education regulation should primarily focus on teaching standards, teacher qualifications, student safety, premises and compliance with the law. Under the KPM table, a tuition centre may be registered as a sole proprietorship or enterprise with minimum equity of RM10,000. Bumiputera equity must constitute at least 30%, and foreign equity is not permitted.

 

 

Source: https://en.wikipedia.org

 

Language, skills and training centres structured as Sdn Bhd carry a higher minimum equity of RM50,000. The 30% Bumiputera requirement applies here too, though foreign equity is permitted — but only within limits set by Malaysia’s Free Trade Agreements (FTA), the bilateral and multilateral trade deals that determine how much foreign ownership is allowed in specific sectors.

 

Company directors and owners are separately barred from becoming employees of the same centre. Branches must mirror the parent centre’s ownership structure.

 

In its initial form at 30%, it is burdensome, what if it were higher, say 50% as some now advocate. This is in fact “backdoor nationalisation” which will impact locals and foreigners considering new investments into Malaysia. It is not viable if 30%, 60% or higher is given “free” to Bumiputera equity holders. Why? Simply because if one has to give “free” shares to another group, the initial return of say 10% is now 5% for the original promoter and “infinity” for the other party. It doesn’t make sense to invest.

 

Equity threshold (30%) should only be applicable to public listed companies not on Sdn Bhds, sole-proprietorships, family-owned “mom and pop” stores. Madani is pandering to the ultras, which love a ‘rent-seeking’ opportunity! It is then a vote for no growth.

 

Reference:

Tuition Centre Owners Told to Find Bumi Partners By 2027, Or Lose Their Licence, Fernando Fong, The Rakyat Post, 17 September 2026

 

 

Is Malaysia’s Economy a Porsche on paper and a Proton on the Ground?

 

According to the Department of Statistics Malaysia, Malaysia’s economy grew 6% in the second quarter of 2026, the country’s strongest Q2 growth outside the pandemic period since 2014. Unemployment stood at 3.0% for the quarter, edging up only slightly from 2.9% in Q1. Headline inflation rose to a modest 1.9%. By almost every conventional measure, the Malaysian economy is performing well. Yet the picture looks very different for the rakyat.

There is a persistent sense that wages are not stretching as far as they used to, that costs keep climbing even as official inflation stays low, and that the prosperity in the national accounts simply is not showing up in household budgets.

A regional survey released in September found cost of living to be Southeast Asia’s single biggest social concern, cited by 42% of respondents, with Malaysia’s own optimism levels notably tempered by it.

Source: https://en.wikipedia.org/wiki/Formula_One

The economy is growing but the people are not feeling it. So, the million-dollar question is, why? What follows is one attempt at an answer, not the final word on it. It starts with a simple observation: everyone is technically competing in the same race, but nobody is driving the same car.

Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour has been explicit about what is driving the headline figure: manufacturing strength on continued global demand for electrical and electronic components tied to artificial intelligence and data centre construction. This is real, but narrow, dependent on capital-intensive investment, global supply chains, and a relatively small number of large export-oriented firms.

These are Porsches in Malaysia’s economic race, purpose-built for this exact moment in the global economy. They cross the line first, and that part is real.

A new data centre or expanded chip fabrication line creates high-value jobs for engineers and technicians, but it does not, in the short run, raise the income of a retail assistant in Kuching, a hawker stall operator in Chemor, or an administrative clerk in Johor Bahru.

The same Q2 data also show what the rest of the field is driving. Agriculture contracted 3.7%, reversing from 2.6% growth in Q1, on weak oil palm and fishing output. Services eased slightly too, to 5.4%, though it remains the largest single contributor to overall growth. Mining is the exception worth an explanation. It rebounded to 10.2% growth after contracting in Q1, but this tracks global energy prices amid the Middle East conflict, not any shift in the sector’s role for ordinary workers, mining employs a small fraction of the workforce compared with agriculture, retail, or services. None of these domestic-facing sectors are accelerating the way the AI-linked engine is, nor should they be expected to. They are also where most of the workforce is employed.

DOSM figures show MSMEs accounted for almost half of total employment in 2025, 48.7%, or 8.09 mil people, spread across retail, hospitality, agriculture, and small-scale manufacturing. This is the sedan most working Malaysians are actually driving: reliable enough for daily use but never built to keep pace with an F1 car. Above all, the gap is not a matter of effort. Same fuel, different costs.

Roughly a year into BUDI95, Malaysia’s flagship fuel subsidy rationalisation, its lagging effects are starting to show. Full rollout came in September 2025, followed by a further quota cut this past April, and it’s this ongoing tightening that distinguishes this lap of the race from Malaysia’s past two-speed moments. The issue is not whether the policy makes sense, but how unevenly its impact lands. Every car runs on fuel, but a rise in fuel cost does not register the same way for every car.

Transport and logistics costs seep into nearly every other price, and when they rise for households no longer covered by blanket subsidies, the effect does not show up cleanly in the 1.9% headline inflation figure.

It shows up instead in what many Malaysians experience as everyday inflation, food away from home, transport-dependent services, the small recurring costs of running a household or small business.

A household on the domestic-facing track, where income growth has been modest, experiences the same subsidy adjustment as a proportionally larger bite out of a budget that was not expanding to begin with. The policy may be sound and necessary. Its distributional timing, arriving while one part of the economy surges and the other merely holds steady, is what turns a fiscally responsible reform into felt financial strain for a large share of the population.

To return to the analogy: the Proton sedan feels this pinch immediately as its budget was never built with much margin. The Porsche, by contrast, barely notices the same rise in fuel cost against a defined revenue stream from various businesses of its owner. Different cars need different strategies.

To be clear, I am not arguing against subsidy rationalisation. Fiscal discipline, targeted subsidy reform, and Malaysia’s push to attract high-value AI and data centre investment are each sound policy directions on their own merits, and the second quarter’s figures reflect real, creditable achievement. This is not a case of Malaysia’s economic management having failed. The issue is sequencing and absorption, not direction, and no amount of steady driving closes a gap between two fundamentally different machines. Something else may need to change the terms of the race. 

Malaysia is not the first country to face this problem, a narrow, foreign-investment-driven engine generating headline growth the rest of the economy does not proportionately feel. Ireland offers one parallel worth considering: a small number of multinational tech and pharmaceutical firms account for a strikingly large share of its corporate tax revenue, disconnected from activity in the rest of the Irish economy. Dublin’s response, modelled explicitly on Norway’s sovereign wealth fund, has been to divert a portion of that windfall into long-term investment vehicles rather than spend it through the ordinary budget. Notwithstanding, Ireland’s own fiscal watchdog has warned the government is saving too little of it and spending too much now, a reminder that the temptation to let the fast car keep everything it earns is not unique to any one country.

Malaysia’s version of this question, whether AI-linked investment and export revenue should be treated, in part, as a windfall to be channelled deliberately toward the rest of the field, deserves its own careful examination.

A sedan does not become a Porsche by driving more carefully. Understanding where the growth is coming from, and where it has not yet reached, seems a reasonable place to start before anyone proposes how to bring the rest of the field closer to the front.

Reference:

Malaysia’s economy is an F1 car on paper, a sedan on the ground, Dr Mohd Zaidi Md Zabri, Focus Malaysia, 28 Sept 2026

Average Monthly Salary of Malaysians in 2025

 

The total number of monthly salary and wage earners rose to 12.01 million, up from 11.96 million in 2024. Malaysians accounted for 10.38 million, or 86.4% of all full-time paid employees. The average monthly salary and wage of Malaysians increased by 4.1% to RM3,803 in 2025, compared with RM3,652 the previous year, according to the Salaries and Wages Survey Report 2025 published by the Department of Statistics (“DOSM”). The median monthly salary and wage increased by 5.3% to RM2,940 from RM2,793 in 2024. 

 

Source: https://en.wikipedia.org

The services sector, which represents 71.5%, was the main contributor to the increase in the number of wage earners, rising by 1.8% to 7.42 million people. Meanwhile, mining and quarrying had the highest average monthly salary and wage at RM6,175, followed by services (RM3,993), manufacturing (RM3,357), construction (RM3,188) and agriculture (RM2,575), according to DOSM. 

In terms of skills, skilled workers, accounted for 36.6% of all salary earners, recorded the highest average monthly salary and wage at RM5,799, compared with RM5,582 in 2024. The semi-skilled category, which accounted for 55.6% of salary earners, recorded a 4.2% increase in average salary to RM2,714 from RM2,604, while the low-skilled category rose by 2.6% to RM2,184 from RM2,128. 

Selangor recorded the highest share of salary earners, at 25.6% of the total number of paid Malaysian workers, followed by Johor (13.6%) and Sarawak (7.6%). Five states recorded average monthly salaries and wages above the national level: Putrajaya (RM5,417), Kuala Lumpur (RM4,955), Selangor (RM4,258), Penang (RM3,912) and Labuan (RM3,887). 

It looks pathetic. With rising cost of living the average wage may not be sufficient to survive in large urban areas. Employers who are generous are few and far between. Large banks, for example, make RM4 billion a year but employees at mid-level or low-level are paid below satisfactory level. The next stage will be AI. The use of AI soon will result in many jobs including counter clerks, transaction officers and credit officers becoming irrelevant. The digital wave is going to affect many industries, and some will have to re-skill for the future. 

Reference:

Average monthly salary of Malaysians up 4.1% to RM3,803 in 2025, FMT, 21 Sept 2026