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The New Poverty Line Index Explained

Just when things started looking up, the pandemic arrived and threw a wrench in just about every developmental plan laid out by the government. 2020 was supposed to be a pivotal year, and it is, just not in a good way. 

Before Covid-19, Malaysia’s unemployment rate was at an all-time low of 3.2% in January 2020.[1] However, when the virus hit, many lost their jobs and the rate of unemployment soared to 5.3% in May 2020. It was the highest recorded number for unemployment in the past 27 years. 

Source: The Edge Markets

At the height of this pandemic, it was estimated that 1.5-2.4 million more Malaysians, which accounted for 5%-8% of the population, would become impoverished as a result of the pandemic.[2]

It is an alarming number especially when taken into consideration that this is in addition to the estimated 400,000 households who are already poor.[3] As the situation slowly stabilised and new standard operating procedures (SOP) were put into place, the unemployment rate slowly recovered to 4.7% by August 2020.[1]

A total of 741.6 thousand people are currently unemployed as of August 2020. This is a slight decrease from the unemployment spike in May 2020 going from 5.3% to 4.7%[4]

Poverty Not Just In Dollars And Cents

While the economy slowly picks up from the brunt of the pandemic, we must not discount the fact that although people are regaining jobs, poverty is very much present. 

Take for instance the digital divide in our country. Many retreated back home and sought comfort in the internet, but it soon became clear that not everyone had that luxury. Working from home proved difficult due to lack of facilities, and that’s not to mention the thousands of students who had to adapt to online learning in areas where there isn’t internet coverage. 

Remember the case of Veveonah Mosibin who became the new face in bringing the problem of digital divide in our country to light. She was not alone in her plight however, as more and more determined individuals came to light with their efforts in staying connected and informed.

Source: Free Malaysia Today

It became obvious how basic internet and digital devices are a new necessity in the modern era. Many relied on it for food, deliveries, communication, news, work and study. It was also noted that other deprivations that could be taken into consideration are access to basic amenities and access to basic transportation.[4]

Poverty lines go beyond basic subsistence, and include having the resources to lead a healthy, active and dignified life and being able to participate meaningfully in society.[5]

As the standard of living increases due to the increasing prices of basic amenities, products and services, the poverty lines should also be adjusted in order to reflect the current expense of living. 

Current Poverty Calculations

The government has recently revised its methodology and raised the Poverty Line Index (PLI) from RM980 to RM2,208. The government calculated that the minimum amount of money needed to buy food is RM 1,169. The other RM 1,038 is allocated for non-food items. The calculations now factor in healthy eating requirements and 146 non-food items. These items were decided by studying the spending patterns of the B20 group in the 2019 Household Expenditure Survey.[6]

From the aspect of food items before this, we looked more towards the concept of ‘minimum’, but this time we stress on the discussion with the Health Ministry – optimum and healthy and quality, and it is based on 2017 Recommended Nutrient Intake and the Malaysian Dietary Guidelines,[6]

Datuk Seri Mohd Uzir Mahidin, Malaysia’s Chief Statistician

Examples of food items include:[6]

Examples of non-food items include:[6]

The caloric intake of a household is calculated in order to determine the minimum amount of food needed for a healthy living. Assuming that the calorie intake for a household 3.9 people is 7,820 kcal for 2019, compared to 6,474 kcal for 4-people household in 2016.[6] 

An example of the calculation can be seen below:[6]

Source: Household Income and Basic Amenities Survey Report 2019 (page 103), Department of Statistics Malaysia

This new and detailed approach to calculating poverty is by far more accurate than the previous attempts. An accurate take on the current needs of the population is absolutely important so that the higher ups are able to grasp just how little they have. The government has already revised the old ways of calculating poverty by making use of the MPI system.

Before being able to draft a plan of action, the first step is to properly understand the problem at hand. Stimulus packages can only go so far if a long-term plan is not put into play. As the times progress, so do it’s problems and needs. In order to defeat an age old, yet ever evolving problem we must also adapt and evolve our methods along with it. 

Explore our sources: 

  1. UNDP. (2020). Who are the poor and How are they poor? Link.
  2. Arjuna Chandran Shankar, The Edge Markets. (2020). Malaysia unemployment rate escalates to 5.3% in May. Link.
  3. Derrick A Paulo and Ikhwan Rivai, Channel News Asia. (2020). Can the poor in Malaysia cope with the challenges posed by the COVID-19 pandemic? Link.
  4. DOSM. (2020). Key Statistics of Labour Force in Malaysia, August 2020. Link.
  5. Kenneth Simler, World Bank. (2019). An idea whose time has come: Increasing Malaysia’s poverty line. Link.
  6. MyPF. (2020). Malaysia’s Poverty Line Income Revised. Link.

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