In 2020, over half of the global population are left unguarded by any form of social protection .
A social protection program of a country should be an anchor to its people. Without a solid ground to hold onto, the fate of the people would spiral downwards.
Social protection includes the social assistance that comes from the government’s coffers and privately-run social insurances to ensure the basic needs of children, the working adults who are unable to be a part of the workforce for various reasons and the senior citizens.
Listening in to the budget proposals and COVID-19 stimulus packages by the government each October, huge nominals had been chalked up aiming to improve the livelihood of fellow Malaysians.
The question remains: Has it amounted to adequate and holistic coverage for Malaysians out there?
Since 2011, the B40 has been the focal point of the Bantuan Sara Hidup (formerly known as Bantuan Rakyat 1 Malaysia) scheme. A monthly income of less than RM4,849 has been at the forefront of the government social protection framework. However, a recent World Bank Report, indicated that we have a large coverage gap when it comes to social protection.
This oversight was exacerbated by the economic shocks and sudden changes brought about by the COVID-19 pandemic. The emphasis on a specific income bracket (B40), group of children (i.e. poor household, boarding school students), formally employed and civil servants pensioners had only created a chasm.
By narrowing down the beneficiaries of social protection, we have excluded a good portion of Malaysians out there – known as the “missing middle”
There is an enormous push for countries to move to fiscal consolidation, after the massive public expenditure of their crisis response measures. But it would be seriously damaging to cut back on social protection — investment is required here and now. – Shahra Razavi, director of the ILO’s Social Protection Department 
On the fence
The “missing middle” refers to:
- The portion of households or individuals who are not covered by both social assistance and social insurance
- Usually consists of the emerging middle class and those who are part of informal employment .
- The precarious position of this group in their income security is prone to any tectonic shifts in the economic climate. The group can easily be trapped in poverty and their upward mobility will be hindered.
A solid social protection program should be able to protect the rights of each of their citizens to obtain a standard living, prevent their people from slipping downwards and ensure that each one of us is able to be uplifted from our current social standing.
We are only as safe as the most vulnerable among us; our well-being and destinies are intimately entwined, regardless of our location, background or work. If some people cannot count on income security while sick or in quarantine, then public health will be undermined and our collective well-being jeopardized. – Guy Ryder, International Labour Organization (ILO) Director- General 
Neither Rich Nor Poor
Our current income classification places the emerging middle class in the M40 group with an overall monthly income that ranges from RM 4,850 – RM 10,959. Due to the pandemic, it was estimated that 580,000 M40 households fell into the B40 group . Prior to the pandemic, the M40 bracket had always been on unsteady ground.
The M40 household’s living standards are no different to those belonging to the upper segment of the B40 group (monthly income RM 3,970 – RM 4,849); when other factors such as their geographical location, household composition and income disparity are taken into account. Despite this reality, the income group receives a lesser amount of benefits.
Budget allocation over the years had been few and far in between to fortify their position or to promote upwards mobility of the M40 group such as the Housing Assistance Programme, Youth Housing Scheme under the Rent-to-Own programmes. This may alleviate the concern of young M40 families looking forward to owning a property.
Another benefit that excluded the M40 household is child-care related benefits. For example, a middle-income household with joint earnings of RM 5,000 (with each parent making RM 2,500) is not qualified for any child-care associated social assistance (i.e Bantuan Kanak-Kanak and Bantuan Prihatin Rakyat) . At the same time, the household is also unable to partake in the tax system in which only 15% of Malaysia’s workforce files an income tax. The middle-income household is disadvantaged when it comes to receiving child-care benefits .
The announcement of PEMERKASA+ earlier in 2021 may signify a better understanding of the government’s side of what the M40 requires to ensure they are protected from adversity. The stimulus package includes aid to small-to-medium enterprises (SMEs) which usually are owned by M40 individuals or are a part of its payroll.
The Drawbacks Of Informal Employment
Thus far, our social protection program safeguards those who belong to informal employment with schemes such as the Employment Insurance Scheme and, SOCSO which cushions them from impact in unforeseen circumstances such as injuries, work risks or retrenchment. which results in retrenchment.
That said, there are at least 1.26 million informal workers in 2019 – 71.7% are own-account workers, 17.1% are employed informally and 8.9% are unpaid family workers.
Our informal workers include hawkers, freelancers and even home bakers who often live on the day-to-day income. With the imposed cyclical Movement Control Order (MCO), they were severely impacted by the closure of roadside stalls, markets or even bazaars that became their sources of income.
In 2017, SOCSO launched Self-Employed Social Security (SESS) to safeguard self-employed persons in incidences of occupational diseases and accidents during work. Initially, the scheme was compulsory for e-hailing, bus and taxi drivers and has since extended to other work sectors such as beauty and healthcare in 2020.
At the same time, the EPF voluntary contribution for self-employed was initiated in 2018 and had been supported by the government with the allocation of RM 50 million in 2020. Due to their voluntary nature, these programmes may have caused a meagre uptake.
There are further attempts by the government to protect the informal workers. For example, e-hailing drivers, public contractors and volunteers were provided with a subsidised full contribution of the injury scheme in Budget 2021. However, there’s a sizable number of informal workers who are excluded from receiving stimulus packages such as the Bantuan Prihatin Rakyat as it relied on a formal social insurance system for distribution. The gig economy or informal employment is here to stay with rapid technological advancement and digitalisation and our social protection system needs to catch up.
Many of them [referring to informal workers] have jobs but because of the MCO they can’t earn, so they would come and ask for cash because they need help to pay rent. – Datuk Munirah Hamid, founder of Pertiwi Soup Kitchen
Crisis During The Golden Age
With our current life expectancy of 75, we are set to become a “super-aged” nation by 2060. Our minimum retirement age is 60 and the retirement plan is catered to both specific civil servants and those in the private sector. The civil servants are provided with a monthly pension and at the same time benefits from social assistance such as Bantuan Warga Emas (BWE) and Bantuan Sara Hidup.
The minimum amount of savings; RM 240,000 in the Employment Provident Fund (EPF) could sustain at least 5 years or less depending on a senior citizen’s standard of living. Even so, recent findings have shown that the amount of pension (i.e. RM 1,000) allocated monthly is no longer sufficient and with the recent COVID-19 withdrawal schemes, only 18% of EPF contributors would reach a minimum amount of contribution by retirement age .
This raises the question of whether our ‘missing middle’ would be able to sustain through their retirement. At the same time, informal employees have been excluded from the two aforementioned plans. Financial security would be an issue that would permeate the ‘missing middle’ in their old age and would necessitate them to dip into their life savings and rely on their children for financial support .
Uplifting The ‘Missing Middle’
To enhance upward mobility, Khazanah Research Institute (KRI) has recommended that the government should consider rectifying our social protection policies and ensure universal benefits are distributed to individuals and households in every layer of the income classification.
Investing more in the “missing middle” is a good call as they are the drivers of the nation’s economy. A strong and prosperous middle class is linked to stronger economic growth and builds on our Gross Domestic Product index (GDP).
At the same time, the middle-class purchasing power spurs the need for better goods and services further nurturing the SME sector. Informal employment would benefit from better coverage that keeps them well-prepared for any unforeseen circumstances which would jeopardise them. These steps and the addition of a better retirement scheme could allow them to spend their golden years in comfort.
A strong middle class can support well-being and GDP per capita growth, as it boosts that share of population with secondary and tertiary education. – Organization for Economic Co-operation and Development (OECD) in Under Pressure: The Squeezed Middle Class
Fortifying financial literacy
However, the changes in the structural level may be arduous and would require a paradigm shift. What can be done as an individual classified as the ‘missing middle’, is to be more well-versed with financial literacy.
Here are five Malaysian organisations that could help you improve your financial literacy:
- The Simple Sum Malaysia
- Agensi Kaunseling dan Pengurusan Kredit (AKPK)
- Generasi Gemilang Duit Right
Explore our sources:
- International Labour Organisation.(2021). World Social Protection Report. Link
- World Bank. (2021). Aiming High: Navigating the Next Stage of Malaysia’s Development. Link
- International Labour Organisation. (2017).World Social Protection Report 2017-19: Universal Social Protection to Achieve the Sustainable Development Goals. World Social Protection Report 2017/19. Geneva: International Labour Office. Link
- FMT Reporters.(2021). 580,000 M40 households fall into poverty. Free Malaysia Today. Link
- H.Abdul Hamid, G.Wai Son Ho, and S. Ismail. (2019). Demarcating Households: An Integrated Income and Consumption Analysis. Kuala Lumpur: Khazanah Research Institute. Link
- A. Thevamanohar. (2020). Malaysia’s social protection spend moderating since 2010. The Edge Markets. Link
- S.L. Cheah and S.J. Almeida. (2017). Demystifying affordable housing issue in Malaysia. Bank Negara Malaysia. Link
- C.W.Wong. (2019). Middle class malady. The Star. Link
- Khazanah Research Institute. (2021). Building Resilience: Towards Inclusive Social Protection in Malaysia. Link
- Department of Statistics. (2019). Informal sector Workforce Survey Report, Malaysia. 2019. Link
- A.Abdur Rahman, A.F.Jasmin and A.Schmillen.(2020). The Vulnerability of Jobs to COVID-19: The Case of Malaysia. ISEAS Institute. Link
- S.J.Zaahid and S.A.Noorshahrizam. (2021). As lockdown continues, Malaysia’s informal workers look to soup kitchens and NGOs for survival. The Malay Mail. Link
- World Bank. (2020). A Silver Lining: Productive and Inclusive Aging for Malaysia. Link
- OECD. (2019). Under Pressure: The Squeezed Middle Class. Link