Budget 2024: Help for the middle class

 

As Budget 2024 approaches, it is important to remember that all income groups have been squeezed by higher inflation and cost of living as well as sluggish wage growth which combined have reduced our purchasing power.

For example in 2022 the T20 saw the equivalent of a reduction in income of around RM4,200 on average per month due to inflation and the M40 have lost about RM1,700 in real spending. So even if the top-earners can cope, the middle-income group needs support.

Middle-income earners benefit from subsidies and get relatively more than the top and bottom income groups. Around 41% of petrol subsidies go to the M40 compared to 12% to the T20 and 18% to the B40.

So the M40 will be hit hard if petrol subsidies are removed too quickly. The government must ensure that targeted, transitional help is provided as the much-needed subsidy rationalisation reforms are introduced.

Middle-income earners also benefit from other subsidies but unlike the low-income groups they do not need nor do they benefit so much from cash transfers.

Instead it is important to widen M40 income opportunities with incentives for flexible working arrangements (FWAs), work from home (WFH) and shorter working weeks to free up time for them to earn secondary income from freelance, gig-economy jobs and micro-enterprises.

Good tax incentives on secondary incomes will also help middle-income groups. Above all the key is to provide wider universal opportunities to increase incomes rather than extend limited cash payments, projects or welfare programmes.

The recent “eating out” controversy is an example of how higher prices, low-incomes and demanding work patterns leave a negative impact on the middle-classes in particular.

The insistence on long working days and the demands of commuting mean that many people rely on eating out because they have fewer opportunities to shop, prepare food and eat at home. Time poverty means that they eat out more often.

As eating out has become more expensive it takes up more of their disposable income and so the cost of living becomes more of a burden. Eating out has become less of a luxury or recreational activity and more of a cost of working due to long working hours. It affects everyone who works because it increases the cost of working for individuals.

Other costs of working also matter including petrol, parking, tolls or the equivalent in public transport. In my own personal case these costs, including food, add-up to more than RM1,000 per month.

You can calculate for yourself how much you can save and how much more disposable income you would get from flexible options.

Saving RM11 per day is a 10% increase for 50% of employees on the median RM2,600 monthly wage.

FWAs or WFH schemes give people more time for day-to-day activities and they can economise better. They can plan grocery shopping and prepare food at home and they can reduce commuting costs and time.

It is not so much a question of planning finances better, it is more a question of planning time better but so long as employers resist FWAs, WFH and short working weeks people do not have the options to adjust and plan their time.

At the moment FWAs, WFH and short working weeks are all voluntary and in the control of employers who often see them as an extra cost or loss of control over their staff. If wages rose by 10% due to changing work patterns, employers would not need to raise wages.

So better incentives and a change in mindset are required and these need new policies in Budget 2024 that empower employees, reduce costs to employers and raise incomes for the middle-class. - FMT 

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.