Different Realities State of Households 2018 15 October 2018 +THE - PowerPoint PPT Presentation

Different Realities State of Households 2018 15 October 2018

+THE STATE OF HOUSEHOLDS 2018 Background: What is the Economy? Capital, Labour and Productivity are Inputs to create Output or GDP. GDP can be measured by Expenditure, by Sectors or by Income Y = AF(K,L) Y = AF(K,L) Expenditure (X-M) C I G Sector Agri- Manu- Mining Services culture facturing Income Wages Profits Rents 2

+THE STATE OF HOUSEHOLDS 2018 Background: The Economic Machine The economic machine takes Capital and Labour as inputs to produce GDP; Labour receives Wages as reward – how do we increase Wages; how are Wages distributed? How the Economy Works Profits Capital GDP Y = = AF( F(K,L) K,L) Labour Wages Distribution Productivity • Higher productivity drives GDP per household RM177,184 T20 households higher wages. Mean household income RM83,496 take 50% of total • Higher quality labour inputs Median household income income RM62,736 drives productivity. How do Source: DOSM, KRI Calculations we increase labour quality? Note: Data is for 2016 and is in per annum terms; Avg Household Size: 4.2 people • The economy combines labour and capital to produce output . In return, labour gets wages and capital gets profits . • Increasing wages requires increasing productivity. Increasing productivity requires 3 increasing labour quality . How do we improve the quality of labour?

+THE STATE OF HOUSEHOLDS 2018 Background: From Inputs to Outcomes Macro outcomes impact and are impacted by inputs from government policy. Similarly, Government policy both impacts and is impacted by Labour inputs (People). KLCI Index Current Account GDP Unemployment Macro Balance Outcomes Ringgit Inflation Fiscal Interest Rate deficit Debt Rates Bumiputera Industrial Labour Technology Policy Policy Market Policy Trade Housing Government Policy Policy Agriculture Monetary Energy Education Policy Policy Policy Policy Policy Social Nutrition Affordable Care Work Protection Housing Decent Jobs People Inputs School- Work Agri Access to Socio-economic Transition Smallholders healthcare mobility • Quality of economic growth ultimately depends on quality of inputs. • KRI’s mission is to undertake research on issues affecting the quality of life – and therefore productivity – of people. The research seeks to influence policies with the objective of achieving development outcomes beneficial to all Malaysians . 4

+THE STATE OF HOUSEHOLDS 2018 Background: KRI’s 5 Focus Areas Amidst the context of Demography, Science & Tech, and Politics & Geopolitics, KRI undertakes research in 5 areas impacting Growth, Equitability, and Societal Well-Being The Context in which We Operate Research Areas Impact Areas Growth Societal Well- Being Politics and Science and Int’l Food trade and geopolitics technology Agri. Equitability Shelter Jobs and and Public cities skills health Demography • KRI investigates issues that impact Growth, Equitability, and Societal Well-Being within the contexts of Demography, Science & Technology, and Politics & Geopolitics. • Using the lenses of Shelter & Cities, Jobs & Skills, Food & Agriculture, International Trade and Public Health, KRI forms policy insights relevant to Malaysia. 5

+THE STATE OF HOUSEHOLDS 2018 Background: Our Journey So Far KRI has published 9 Books, 9 Discussion Papers and various articles since its inception in 2014. Books Discussion Papers • KRI publishes books, discussion papers and articles, aimed at ultimately influencing policy directions, while improving public awareness about crucial policy issues. 6

+THE STATE OF HOUSEHOLDS 2018 Research Impact: Affordable Housing Housing is a pressing issue for households, with Malaysian homes becoming more unaffordable for most Malaysian people Making Housing Affordable Why Does Affordable Housing Matter? Key Recommendations: Median multiple affordability by Household loans • Designated procurement route for by purpose, 2017 state, 2007 & 2016 affordable housing 5.1 & Over P. Pinang 5.5 • Introduce shorter term Mortgage 57% Severely N. Sembilan 5.1 moratoriums Unaffordable ≥5.1 • Create integrated database for the Hire 18% 2015 purchase Johor 5 efficient planning of housing units KL 5 4.1 to 5.0 MALAYSIA 5 MALAYSIA 4.4 Seriously KL 4.9 Personal P. Pinang 4.1 8% Unaffordable Selangor 4.7 loan 4.1 Policy Impact: National Housing Policy Securities 8% purchase • KRI tasked to work with JPN-KPKT Selangor 3.6 3.1 to 4.0 Johor 3.5 Moderately N. Sembilan 3.3 Melaka 3.1 Credit in formulating new National 4% Unaffordable card Housing Policy 2.0 (DRN 2.0) • DRN 2.0 built on assessment of 3.1 Others 5% Melaka 2.9 Affordable housing demand , housing 2.1 supply , and spatial analysis of the 2007 2016 Total = RM908 bn 2018 housing market Source: NAPIC, DOS, and KRI. Only states with 60% or more Source: BNM formal housing surveyed are reported in this chart. • Malaysian homes have become more unaffordable. In addition, 57% of Malaysian household debt is for mortgages. Continuing research into Affordable Housing is critical. • KRI has focused on its research and advocacy into Affordable Housing, leading the formulation of Dasar Perumahan Negara 2.0 with JPN-KPKT. 7

+THE STATE OF HOUSEHOLDS 2018 Research Impact: Trade Policy Trade is an integral part of Malaysia’s long history, since the days of the Langkasuka and Melaka Empires, impacting not just the broader economy, but also everyday lives. Trade is an Integral Part of Malaysia’s National KRI’s “Why Trade Matters” reports Income • How globalisation Real GDP, exports and total trade-to-real GDP % affects daily lives of 1,800,000 180 2017: Malaysians RM1,480 bn • Non-tariff barrier 1,600,000 160 issues 1,400,000 140 • Complexity of trade 2015 2015 2017 1,200,000 120 RM millions agreements 1,000,000 2017: 113% 100 • Domestic labour % issues. 800,000 80 2017: 600,000 60 Malaysia’s Trade Governance at a Crossroads RM885 bn 400,000 40 Malaysia’s trade and investment 200,000 20 policies , against the backdrop of changing global trade environment . 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 IO report (2018) Real GDP (MYR mn) Exports (MYR) Linkages between the input and output % of total trade/real GDP 2018 sector of the Malaysian economy Source: Dos (2017) • Malaysia’s economic history is a history of external trade . Today, trade is 113% of GDP. • KRI’s publications on trade policy compile a history of Malaysian trade and investment policy linkages between sectors in the economy, aiming to support policymakers in designing trade policy to suit the Malaysian context. 8

+THE STATE OF HOUSEHOLDS 2018 The State of Households I Where it all began: KRI’s first publication sought to provide a data -driven understanding of Malaysian households. 2014 GDP per capita ≠ Lower income households Wealth inequality is one Households Incomes spend higher % of income consequence of income inequality Monthly Income Distribution Amount in Malaysia (2012) GDP per household RM12,369 Average household income RM5,000 Median household income RM3,636 From ‘95 to ‘02, nominal GDP per capita >50% of households that spend <RM The total savings of the top 17.1k EPF increased by 6.7% p.a. but median 2,000 a month, use 50% to 70% of total members are greater than that of the household income increased 5.9% p.a. expenses for food, housing and utilities entire bottom 44%, ( 2.8mn members) Growth in salaries < Energy subsidies Inequality is Many economic growth in productivity regressive, favour national, and within sectors rely heavily businesses ethnic groups on foreign workers Indexed value 2400 (1960=100) Productivity 2000 1600 1200 800 Wages 400 0 60 70 80 90 00 10 <24% (RM 5.6bn) of fuel From 1990 to 2010, migrant 26% of ‘ Bumi ’ households subsidy benefit households labour has grown from 380k to Productivity has grown nearly earn below RM 2,000 a month while remainder benefits 2.1m of the total workforce. 2000x since 1960, while wages (Chinese: 13%., Indians: 29%) businesses and other entities grown only around 1600x • Using data from the Department of Statistics Malaysia, SOH I provided quantitative evidence at the microeconomic level on inequality, household incomes, distribution policies and foreign workers. 9

+THE STATE OF HOUSEHOLDS 2018 The State of Households I SOH 1 shifted public discourse regarding household income vs GDP, median vs mean income, and petrol subsidies, among others. 2014 Press Coverage 10