There is a critical and urgent need to transform the Malaysian economy through the creation of more high-paying jobs in higher value-added activities, in order to elevate the collective welfare and income of households, said Khazanah Research Institute (KRI).
KRI State of Households 2020 report revealed that while absolute poverty has declined, many households remained precariously vulnerable. In 2019, the absolute poverty rate of 5.6 per cent — or 405,000 households — indicates that most households are meeting basic needs. However, there has been little progress in reducing the relative poverty rate, with an incidence of 16.9 per cent or 1.2 million households.
The report also revealed that 11.3 per cent or 835,000 households had incomes not far above the absolute poverty line income, while remaining far below the average living standard. KRI researcher Hawati Abdul Hamid said the current poverty line income (PLI) at RM2,208 a month per household was still relatively lower compared to other countries with similar income levels. “The component or basket of the PLI measurement should be reflective of the current contemporary standard so that we can consistently update or monitor the progress based on the current average living standard,” she said.
In July this year, the government announced that the PLI was revised to RM2,208 a month per household in 2019 from RM980 a month per household in 2016. KRI said that these households are vulnerable to falling back into absolute poverty should they face catastrophic events, such as the ongoing pandemic or job loss. As such, the think tank stressed that economic empowerment initiatives must be scaled up to assist these households in generating higher incomes. Additionally, welfare spending needs to be increased and social protection system be broadened to include more vulnerable households, it added.
Meanwhile, the report noted that residual household income (the excess of income over consumption expenditure) varies widely between income groups. It said the top 10 per cent households had residual incomes of RM12,653 per month on average in 2019, while the bottom 10 per cent only had RM200 per month, on average. KRI said these amounts in gross term is before deducting obligatory payments, such as social security contributions and inter-household transfers. “After accounting for such payments, the situation could be worse, with some households having negative net monthly residual income, ” it added.