In 2019, Malaysia was categorised under the World Bank definition of an upper middle – income economy (DOSM, 2019), with the gross income per capita of RM45,131 with a monthly average of MR3,761[1]. However, not all Malaysians are progressing at the same pace on the economic ladder.
Although the nation’s mean and median monthly income at RM7,901 and RM5,873 respectively[2], this is not a realistic and thorough representation of Malaysian livelihoods. The nation is no stranger to income inequality and these differences need to be acknowledged.
The vast disparity between the distribution of income throughout the population is evident across multiple demographics. Regardless of race, gender, income group, or geographic location, there is a shocking income divide. And it just keeps getting bigger. This is enforced by the discrepancy between the rising cost of living and income growth. People in the lower-income brackets, especially, can be very vulnerable to these effects.
Although we were taught never to compare paychecks, one’s income is the primary method to identify their “comfort” status in Malaysia. Without the difference, nobody (organisations and individuals) would be incentivised to improve their productivity. Not many will care about their career progressions. If a part-timer made the same as a full-timer, just how many would religiously show up to work every day? If a CEO made the same as the postman, how many would commit to the stress of building a company?
Reasonable income inequality promotes healthy competition. However, it is when the disparity becomes too apparent that segregation occurs and livelihoods are affected. Usually, when the divide is too great, the ones making less, are left suffering.
Just How Wide Is The Gap?
The income inequality shows that when the B40s only saw a 1.8% & 3.4% increase in their median and mean income, the T20 group saw 4.5% & 4.7% growth.
What this means is that in 2019, a B40 household would make on average RM3,152 a month, whereas a T20 household would be making six times the amount (RM18,506).
In 2019, the T20 group were making an average income that was 5.87 times more than the B40s. This is an increase in income ratio, as in 2016, the income ratio was 5.65 times more.
Naturally, B40’s income share of total income in 2019 dropped by 0.4 percentage points to 16%, while T20’s income share increased to 46.8%, an increase of 0.6 percentage points.
When it comes to households in urban and rural areas, the median monthly household income increased. The median monthly household income in urban areas grew at a rate of 3.8% from RM5,860 (2016) to RM6,561 (2019), while rising in rural areas at a rate of 3.3% from RM3,471 (2016) to RM3,828 (2019)[3].
Has The Pandemic Widened The Gap?
Although the official statistics have yet to be released by the Department of Statistics, several assumptions can be made about each income group’s financial performance. It is no secret that many Malaysians lost their jobs, others faced pay cuts, and the self-employed were not conducting their own business for months on end.
On the other hand, businesses in the rubber industry, and e-platforms thrived. These CEO’s saw profits like never before and continued to make a profit. It can be theorised that the income gap had gotten much more profound, due to the pandemic.
Ways For Greater Economic Equality In Malaysia
Educate & Upskill While You Can
As the lockdown continues and the future is still uncertain, Malaysians should take this time to upskill and learn something that will enhance their future employability or career progression. Higher levels of education, skills and soft skills will improve the prospects of a higher paycheck.
Only 5% of young adults from the bottom income quintile have a bachelor’s degree, compared to 40% from the top quintile[4].
Those that cannot accord a university education are encouraged to join upskilling programs prepared by the government or sign up for online courses. Programming and social media courses certified by Google and Facebook are free of charge and can be completed quickly. Needless to say, these are among the highest paying jobs currently in high demand.
Increase Tax For The Top Income Group
The tax rate for the top income bracket in Malaysia is low at 25%. Other Asian nations such as Korea (38%) and Thailand (35%) show much higher rates[4]. By doing this, the income inequality divide is reduced, and the extra money can be channelled to bettering the nation.
Malaysia still has a long way to go in terms of growth; that doesn’t mean those who are unable to keep up with rapid change should be left behind. In the long run, no one wins if the rich get richer, and the poor are left getting poorer. The divide is usually followed by extensive debt, increased unemployment rates, and no demand for an increasing supply chain. At the end of the day, if nothing is done, it’s a lose-lose.
Explore Our Sources:
- P. C. Kumar. (2020). Poor in a Rich Nation. The Star. Link
- Department of Statistics Malaysia. (2019). Household Income & Basic Amenities Survey Report 2019. Link.
- I. Lim. (2020). Income inequality in Malaysia widened even while median household income rose to RM5,873 in 2019, according to latest statistics. Malay Mail. Link.
- CompareHero.my. (2018). Impact Of Income Gap and Disparity of Wealth In Malaysia. Link.
