High-income status meaningless if inequality persists, say economists

 

In tabling the 12th Malaysia Plan, Prime Minister Ismail Sabri Yaakob listed raising the gross national income per capita and household income as priorities. (Bernama pic)

PETALING JAYA: The government must not be fixated on high-income status and boosting average household earnings, economists say, as these metrics do not account for inequalities or the standard of living.

Becoming a high-income nation, which as of 2020 required a country’s gross national income (GNI) per capita to exceed US$12,535 (RM52,490), does not necessarily mean the people have more money or are happier, they added, in response to Prime Minister Ismail Sabri Yaakob’s tabling of the 12th Malaysia Plan (12MP) in Parliament yesterday.

In his speech, Ismail said the country was aiming to exceed the GNI per capita threshold in the next five years, and for the national household income to rise above RM10,000.

However, Barjoyai Bardai of Universiti Tun Abdul Razak said that looking at average household income could be deceptive, as it does not take into account gaps between the rich and the poor.

Barjoyai Bardai of Universiti Tun Abdul Razak.

He added that looking at median salaries would be a better indicator of the financial stability of the people.

“Currently, the median salary is only around RM2,000, which means half the population is making less than that. This is perhaps where the prime minister should focus on, that is on how to increase what people are actually making rather than a national average,” he told FMT.

“Even if we reach certain national thresholds, it doesn’t really mean anything, because what matters is whether individual households are able to raise their standard of living. If the top 20% make a lot more money, but everyone else is stagnant, we may raise some indicators but the country is not in a better position.”

Barjoyai suggested the government develop new qualitative and quantitative indexes in order to gauge whether people’s lives are improving, taking into account aspects like happiness rather than just earnings.

Yeah Kim Leng of Sunway University.

Yeah Kim Leng of Sunway University agreed, saying that the metrics that measure income inequality, such as the Gini coefficient, must also be prioritised as the country pursues high-income status.

“It is a good aspiration, but only if growth is equitably distributed. Inequality is a major issue everywhere, especially in a post-pandemic environment because of the asymmetric impact of the pandemic-induced lockdowns where the poor suffered the most.

“The rich, the ‘haves’, will be best positioned to benefit from Malaysia’s recovery, but the ‘have nots’ and vulnerable groups like the young, women and single parents will face difficulties.

“Therefore, the trickle-down effect of wealth must be accelerated and enhanced, so that opportunities can be created for groups in need.”- FMT