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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 in its latest study released today 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 (photo) 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, at a press conference in Kuala Lumpur after the release of the study today.
"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.
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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. - Mkini
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