Welfare in Malaysia Across Three Decades The State of Households - PowerPoint PPT Presentation

Welfare in Malaysia Across Three Decades The State of Households 2020 Part I 13 th October 2020

+ Welfare in Malaysia Across Three Decades Progress over the last three decades has been significant Gross Domestic Product Monthly Household Income Absolute Poverty 18% 1.60 RM9,000 9,000 18.0 RM1.6tr 1.5 8,000 16.0 1.40 16.5* 7,901 7,000 14.0 1.20 6,000 12.0 1.00 5,873 5,000 10.0 0.80 4,000 8.0 0.60 3,000 6.0 0.40 2,580 5.6** 2,000 4.0 1,801 Khazanah Research Institute 0.3 0.20 1,000 2.0 0.2%* 0.00 0 0.0 GDP Mean income Median income Absolute poverty rate * 2005 PLI ** 2020 PLI 1.5 1989 0.3 2019 Note: Data expressed in 2019 prices. 2 Source: DOS (2020b) and KRI Calculations

1. Moderating household Khazanah Research Institute Khazanah Research Institute income growth, slowing economy

+ Welfare in Malaysia Across Three Decades Over the three decades, the rate of growth in household incomes moderated Real gross mean and inequality-adjusted monthly household income, and Gini coefficient, 1989 – 2019 AAGR Mean income: 7.1% Mean income: 3.0% Mean income: 5.0% Adjusted income: 6.7% Adjusted income: 3.1% Adjusted income: 5.8% Gini: 0.5% Gini: 0.0% Gini: -1.0% RM10,000 10,000 1.0 8,000 0.8 6,000 0.6 4,000 0.4 Khazanah Research Institute 2,000 0.2 0 0.0 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 Mean income Adjusted income Gini (RHS) Note: Data expressed in 2019 prices. AAGR stands for average annual growth rate. Adjusted household income refers to mean household income that is 4 discounted with the Gini coefficient. Source: DOS (2020b) and KRI Calculations

+ Welfare in Malaysia Across Three Decades …in line with a slowing economy ever since the AFC Gross domestic product, 1989 – 2019 AAGR GDP: 9.1% GDP: 5.6% GDP: 5.3% 1.60 RM1.6tr 1.5 1.40 1.3 1.20 1.2 1.00 1.1 0.9 0.80 0.9 0.7 0.60 0.7 0.6 0.6 0.5 0.40 0.4 Khazanah Research Institute 0.20 0.3 0.00 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 Note: Data expressed in 2019 prices. AAGR stands for average annual growth rate. 5 Source: DOS (2020b) and KRI Calculations

+ Welfare in Malaysia Across Three Decades Income growth has been underpinned by decreasing importance of paid earnings Share of mean household income, by source for household head, 2012 – 2019 100.0 % 6.5 7.6 Current transfers 8.5 8.2 90.0 9.7 11.4 12.9 12.9 Properties & investment 80.0 17.2 16.0 15.6 Self-employment 70.0 17.3 60.0 50.0 40.0 66.6 65.0 63.0 Paid employment 61.6 30.0 20.0 Khazanah Research Institute 10.0 0.0 2012 2014 2016 2019 Note: Data expressed in 2019 prices. 6 Source: DOS (2020b) and KRI Calculations

2. Higher expenditure, Khazanah Research Institute Khazanah Research Institute changing consumption patterns

+ Welfare in Malaysia Across Three Decades Household expenses increased, especially between 2009 and 2014 Real mean monthly household income and consumption expenditure, 1993 – 2019 RM8,000 80% 8,000 80 7,000 70 68.1% 6,000 60 58.3 57.4 54.4 5,000 50 4,000 40 3,000 30 2,000 20 Khazanah Research Institute 1,000 10 0 0 1993 1998 2004 2009 2014 2016 2019 Income Expenditure Expenditure as % of income (RHS) Note: The years featured in the chart are those with published data for household expenditure, which differs for earlier years with data for household income. 8 Data is expressed in 2019 prices. Source: DOS (2020d), DOS (2020b) and KRI calculations

+ Welfare in Malaysia Across Three Decades Consumption patterns have changed, showing new forms of necessities Index of real mean monthly household consumption expenditure, by selected category, 1993 – 2019 1993 = 100 900 Communication 800 700 600 500 Clothing & footwear 400 Recreation & culture 300 Housing & utilities Food away from home Khazanah Research Institute 200 Transport Food at home 100 0 1993 1998 2004 2009 2014 2016 2019 9 Source: DOS (2020d) and KRI calculations

inadequate savings 3. Low residual income, Khazanah Research Institute Khazanah Research Institute

+ Welfare in Malaysia Across Three Decades Residual incomes varies widely, with limited amounts for low income households Mean residual monthly household income in gross terms, by income decile, 2019 0 – 10 10% RM200 10 – 20 516 20 – 30 798 Household income decile 30 – 40 1,203 40 – 50 1,706 50 – 60 2,323 60 – 70 3,057 70 – 80 4,138 Khazanah Research Institute 80 – 90 5,763 90 – 100 12,653 11 Note: Calculated as the difference between gross household income and consumption expenditure. Source: DOS (2020d), DOS (2020b) and KRI calculations

4. Slower income growth for Khazanah Research Institute Khazanah Research Institute all, persistent disparities between rich and poor

+ Welfare in Malaysia Across Three Decades Income growth has slowed for households in all income groups Average annual growth in household income, by income decile, 1989 – 2019 1989 – 1997 1999 – 2007 2009 – 2019 12% 12 AAGR AAGR AAGR Decile Gini: 0.0% Gini: -0.1 % Gini: 0.5% 10 8 Mean Decile Median 6 Median Decile Mean 4 Median Mean Khazanah Research Institute 2 0 D10 D10 D10 D1 D2 D3 D4 D5 D6 D7 D8 D9 D1 D2 D3 D4 D5 D6 D7 D8 D9 D1 D2 D3 D4 D5 D6 D7 D8 D9 Household income decile 13 Note: Calculated based on income data in 2019 prices. AAGR stands for average annual growth rate. Source: DOS (2017), DOS (2020b), EPU (n.d.a) and KRI calculations

+ Welfare in Malaysia Across Three Decades Attention should also be given to disparities between the top and bottom Share of total household income, by income group and state, 2019 100% 90% 24.3 25.1 25.9 26.2 27.1 27.5 27.9 28.2 28.6 28.8 29.2 29.4 29.4 29.5 29.9 30.4 30.7 Top 10% 80% 70% 60% 50% 68.3 67.3 66.3 65.4 40% 65.4 65.4 63.7 65.5 65.4 63.4 64.8 63.6 63.4 64.4 63.4 63.3 63.4 Middle 70% 30% 20% 10% Khazanah Research Institute 7.8 8.4 7.4 7.6 7.5 7.1 7.7 7.4 7.0 7.1 6.6 6.4 6.4 6.2 6.7 6.3 5.9 Bottom 20% 0% Perlis Labuan Terengganu Pahang Kedah P. Pinang Johor Sarawak KL Melaka Putrajaya Perak Sabah Kelantan N. Sembilan Selangor Malaysia MALAYSIA 14 Source: DOS (2020b) and KRI calculations

many are vulnerable 5. Few absolutely poor, but Khazanah Research Institute Khazanah Research Institute

+ Welfare in Malaysia Across Three Decades Fewer households are in absolute poverty, but relative poverty persists Rate of absolute and relative poverty, 1989 – 2019 25% 25.0 19.5 20.0 17.4 16.9 Relative poverty (2019 PLI: RM2,937) 15.6 16.5 15.0 10.0 7.6 6.1 Absolute poverty 5.6 (2020 PLI: RM2,208 avg.) 5.0 3.8 Khazanah Research Institute Absolute poverty 0.6 (2005 PLI: 0.2 RM960 avg.) 0.0 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 Note: Relative poverty here is defined as households with incomes below 50% of the median by DOS 16 Source: DOS (2020b) and KRI calculations

+ Welfare in Malaysia Across Three Decades To ensure decent living for all, increased social spending is needed Annual social assistance expenditure needed to close relative poverty gap, 1989 – 2019 30.0 RM30b 25.0 24.9 20.0 18.5 15.0 16.4 15.9 12.1 10.0 11.1 10.3 7.5 7.5 6.5 6.6 5.0 5.6 Khazanah Research Institute 5.1 0.0 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 Note: This excludes administrative costs and assumes perfect targeting. This is calculated 17 based on a relative poverty line defined as below 60% of the median household income. Source: EPU (n.d.a), DOS (2020b) and KRI calculations

Khazanah Research Institute Khazanah Research Institute 6. Slow inter-state convergence, sluggish earnings growth

+ Welfare in Malaysia Across Three Decades Income gaps persists between states, as convergence has not been fast enough Real median monthly household income by state group, 1989 – 2019 AAGR A: 8.2% A: 2.5% A: 5.4% B: 7.1 B: 2.3 B: 5.7 C: 3.5 C: 2.2 C: 5.2 D: 4.6 D: 3.8 D: 5.9 MALAYSIA : 6.3 MALAYSIA : 3.1 MALAYSIA : 5.6 RM10,000 10,000 9,581 KL, Putrajaya & Group A Selangor 8,000 5,873 Johor, Melaka, N. MALAYSIA 6,000 Sembilan, P. Pinang & Group B Terengganu Labuan, Sabah & Group C Sarawak 4,000 Group D Kedah, Kelantan, 4,239 2,552 Khazanah Research Institute Pahang, Perak & Perlis 1,708 2,000 1,338 0 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2016 2019 Note: Data expressed in 2019 prices. AAGR stands for average annual growth rate. 19 Source: DOS (2020b), EPU (n.d.c) and KRI calculations