Study: Welfare of Malaysian households improved over last 3 decades

 

As Malaysia braces to face a new wave of economic challenges brought along by the Covid-19 pandemic, a study into the state of Malaysian households over the last three decades has revealed positive development.

The study by Khazanah Research Institute (KRI) examined three periods across the last three decades starting from 1989 to 2019, each marked by a major economic crisis that impacted the welfare of Malaysian households.

"While the narrative of progress for Malaysian households over the three decades is generally positive, with significant improvements in average incomes, poverty, and inequality, we must remain critical in our discussion of how we have progressed and of how we will move forward," said KRI researcher Hawati Abdul Hamid during a virtual launch of the report this morning.

Within the period, average real household income in Malaysia more than tripled from RM2,580 in 1989 to RM7,901 in 2019, while median income rose from RM1,801 to RM5,873, according to KRI's latest publication, "Welfare in Malaysia Across Three Decades".

Household income, as a share of Gross Domestic Product (GDP), increased to 45.7 percent in 2019 from 35.9 percent in 1989, enabling greater household spending and improving welfare.

The study found higher spending by households on items traditionally described as "discretionary", such as recreation and culture. This suggested a higher standard of living.

Hawati noted that the consumption changes also involve items that used to be discretionary but have now become a necessity, for example, mobile data plans.

Much of this increase took place after 2004 as household income growth outpaced GDP considerably, according to the report co-authored by Hawati as well as two other KRI researchers, Christopher Choong Weng Wai and Adam Manaf Mohamed Firouz.

Overall, it was noted that a combination of economic growth and distribution policies over the years led to significant improvement in social welfare aspects.

The report further noted that the increase in average and median incomes could be seen in all states and federal territories during the last three decades.

This was despite various external developments beyond Malaysia’s control, including the Asian financial crisis and global financial crisis which adversely affected both national and household income growth.

In terms of income inequality, the study found that large disparities between the top and bottom incomes persist despite declining headline inequality in the last two decades.

"Beyond summary measures such as the Gini coefficient, more attention should be given to both tails of the income distribution.

"Nationally, the bottom 20 percent of households commanded 5.9 percent of total household income in 2019, while the top 10 percent had 30.7 percent," it said, adding that there was a need to work towards a more equitable society.

Also at the launch today was KRI chairperson Nor Mohamed Yakcop and KRI research advisor Jomo Kwame Sundaram.

Moving forward, Nor Mohamed, a former finance minister II, said the government should continue to provide assistance through economic stimulus packages.

"The government must continue to assist because we are not out of the woods yet," he said, adding that the end goal would be to move Malaysians into a decent standard of living.

Similarly, Jomo said the government should not be afraid to take bold measures in the interest of the people, in light of the upcoming Budget 2021 announcement.

In the coming month, KRI will be releasing the second and third part of its study, "Work in an Evolving Malaysia" and "Social Inequalities and Health in Malaysia", under "The State of Households 2020" series. - Mkini