PETALING JAYA: Malaysia’s categorisation of income earners is rather problematic as those in B40, M40 or others are not “fixed” groups in reality, says economist Dr Muhammed Abdul Khalid.
Citing an example, he said there was just a difference of RM860 in monthly household income among those in the lower rungs.
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“If assistance is given to only those in the bottom 20%, it would seem unfair to others, given the gap is rather small,” he said in reference to Khazanah Research Institute’s (KRI) latest working paper on “Searching for the ‘poor’ and ‘middle class’ in Malaysia”.
According to the KRI findings, only the top 30% (T30) income earners have shown middle-class spending patterns.
The middle 50% (M50), which is the group between B20 and T30 – remains economically vulnerable.
Muhammed, who is a research fellow at the Institute of Malaysian and International Studies of Universiti Kebangsaan Malaysia, said it would also be an issue to just view the T30 as a homogeneous group.
ALSO READ: KRI calls for redefinition of B40, M40, T20 to address economic vulnerabilities
“The gap is sizeable between those in T30 and in the top 1%, which is about RM40,000 per month, with different consumption patterns,” he said.
“Income dynamics is quite volatile, especially among those in the middle-income group.”
Therefore, he said, the intended objectives would not work if policies are made by assuming these groups have “fixed” dynamics.
“In other words, policies will miss the target. The main question should be – what do we use this measurement for, and to solve what problems?
“It is better to use a multi- dimensional approach. Look beyond income and align with the outcomes that we want,” he said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the KRI report provided a suggestion on how to better understand household income and spending pattern in the country.
“It was revealed that the M50 spending pattern was still decent as some of them could send their children for tuition, eat out and buy furniture,” he said.
However, he acknowledged that these income groups are still vulnerable.
Afzanizam said the research is a new way of looking at the income categorisation that could lead to more financial assistance for the bigger group (M50).
More importantly, he said the country should aspire towards more social upward mobility as this would mean that households could elevate their economic status.
“This can be achieved through good education and healthcare amid more equitable economic opportunities.
“In a nutshell, it’s about getting the right perspective on how government assistance can help for the betterment of its citizens,” he said.
Sunway University economics professor Dr Yeah Kim Leng said households in the middle-income group often face difficult trade-offs between spending on immediate needs and longer-term aspirations.
“A clear example is they may prioritise spending on education and healthcare over discretionary items but find it challenging to save for the future or invest in assets.
“Therefore, there is a need for policies that support financial stability and social mobility for middle-income households. These include affordable access to essential services and opportunities for skill development and career advancement,” he said.
Yeah said the findings that only the top 30% income group exhibits “middle class” spending traits and the middle 50% households’ vulnerability to financial stress are reflective of economic realities.
