OUT of seven million Malaysian households, one million are relatively poor. Taking four persons to be the size of a Malaysian household, there are four million relatively poor people in the country. This worrying statistics come bound in Khazanah Research Institute’s (KRI) The State of Households 2018 report. How bad is the “relative poverty”?
It is really bad if we look at the numbers behind the narrative. The Bottom 40 (B40) households earning an income of below RM2,000 were left with only RM76 after expenses. Those earning below RM5,000 are not faring much better. The Middle 40 (M40), as they are labelled, are trapped in the middle. They are cutting back on consumption, though inflation has forced them to spend more. The B40 and M40 groups, it seems, are getting less bang for the buck they are spending.
Although the Gini coefficient showed a marked improvement from 0.513 in 1970 to 0.399 in 2016, it is too close to the World Bank’s 0.04 index, a number that puts Malaysia in a highly unequal society. Perhaps this is what KRI means by the subtitle of the report, Different Realities. Gini coefficient index and gross domestic product are numbers that average everything.
Reality, especially life that is lived day to day, cannot be averaged in this way. Reality for the B40 must really bite, especially when they are left with a mere RM76 after paying their bills. Absolute numbers, it appears, tell the real story.
Economists warn us of the severe costs that wealth gap brings. One such consequence is the erosion of social cohesion. Not only the poor will suffer, so will the national economy.
What can the government do? Handouts are definitely not the answer. As a Chinese proverb puts it: Give a man a fish, you feed him for a day. Teach a man to fish, you feed him for a lifetime.
That is a solution for the long term. But in the meanwhile, the man may need the fish until he is taught how to fish, that is. However, the handouts or subsidies should be targeted to make sure the truly deserving get them. We have heard of the rich lining up for the financial assistance meant for the poor. Such loopholes must be plugged. For the long term, the government needs to develop an education system that encourages the development of high-quality human capital. This is especially so as Malaysia has set its sight on being an advanced nation by 2023.
KRI data shows that Malaysia is lagging behind the Organisation for Economic Cooperation and Development (OECD) countries: the mean reading score for the country is at the 25th percentile of the OECD average score, while the Mathematics score is slightly above the 25th percentile.
In skills development, too, Malaysia has much room to catch up. Malaysian employers frequently lament the lack of skills among our graduates. As evidence, they point to the estimated 50,000 graduates being unemployed. A major mind shift is needed in
the way Malaysians think about education and learning if we are serious about reducing the wealth gap.