KUALA LUMPUR: Khazanah Research Institute's (KRI) latest study finds that the current classification of the Bottom 40 (B40), Middle 40 (M40), and Top 20 (T20) income groups does not accurately reflect the true economic stratification of Malaysian households.
Instead, the findings revealed that only the Top 30 per cent (T30) income earners exhibit middle-class spending patterns, while the Middle 50 per cent (M50)-the group between the B20 and the T30-remains economically vulnerable, experiencing trade-offs between essential and aspirational expenditures.
"The findings raise an important question about the validity of the current household demarcation of B40, M40, and T20 adopted by the government of Malaysia," KRI said in a statement today regarding its latest working paper titled "Searching for the ‘Poor’ and ‘Middle Class’ in Malaysia,” published on Dec 30, 2024.
According to KRI, Malaysia has consistently followed the World Bank’s demarcation of B40/M40/T20 from the Ninth Malaysia Plan to the Eleventh Malaysia Plan for almost 15 years, from 2006 to 2020.
"Most policies equate B40 to poor households and M40 to middle-class or ‘aspirational households’.
"These demarcations may not be entirely accurate since the households within these ranges do not exhibit similar consumption characteristics," it said.
For instance, it noted that the consumption pattern of the group between the B20 and the T30, referred to as the M50, appears relatively homogeneous in that these households are still experiencing trade-offs between necessities and more aspirational products.
"These households demonstrate only minor differences from the B20 group. Some households may eat out, send their children to tuition classes, or spend more on household furniture.
"This middle M50 is not the middle class and remains vulnerable," it added.
KRI pointed out that, consequently, it would be more accurate to assert that only the Top 30 per cent of households are in the middle-class or aspirational class, rather than the previously assumed 60 per cent.
In the summary of the paper, KRI also highlighted that the M50 group remains vulnerable, with limited capacity for aspirational consumption. Their consumption patterns reflect ongoing vulnerability and restricted access to aspirational goods and services.
KRI called for the redefinition of classifications for targeted policies, urging policymakers to move beyond outdated categories and adopt an integrated-expenditure framework.
This approach, it believes, will ensure that resources are directed where they are most needed.
"Interventions such as targeted subsidies for education and healthcare, along with job creation initiatives, are crucial to improving the economic stability of the M50 group, enabling them to transition into aspirational consumption and fostering upward mobility," it said.
KRI also urged the government to prioritise the B20 group with policies that ensure access to affordable housing, food, healthcare, and other basic necessities, which are vital to safeguarding their well-being. - Bernama
