KUALA LUMPUR: Khazanah Research Institute (KRI) has proposed an alternative demarcation of households by adopting disposable or net income in measuring households’ economic well-being, taking into account income disparities in different locations and factoring in household sizes to better compare living standards.
Its senior research associate Hawati Abdul Hamid said the current practice of using the Bottom 40 (B40) households to describe the poor had not been adjusted to account for different household sizes — household incomes were not “equivalised” or standardised for varying household sizes.
“Solely targeting the B40 households for the provision of social assistance can be both ‘too narrow and too wide’ at the same time.
“In the context of poverty and ensuring the minimum living standards, the B40 demarcation would over-extend the coverage, as a significant proportion of the B40 may not require the same type of social assistance as those in absolute poverty,” she told reporters during the presentation of KRI’s latest discussion paper, ‘Demarcating Household: An Integrated Income and Consumption Analysis’ here yesterday.
The B40 demarcation refers to the group of households with the lowest 40 per cent of the income distribution.
It was adopted by the government from the 9th Malaysia Plan (MP) to address inequality and was applied extensively as a policy targeting mechanism in the 11th MP.
The discussion paper was co-authored by Hawati, KRI director of research Dr Suraya Ismail and KRI research associate Gregory Ho Wai Son.
Meanwhile, Suraya said among the key takeaways from the discussion paper were the need for a more refined measure of income as the B40 demarcation was a relative measure designed to monitor progress in addressing inequality and distributional concerns.
“Households which are only able to fulfil their basic needs (food, housing and clothing) tend to be concentrated approximately in the bottom 20 (B20) with equivalised income of below RM1,196.
“As households become richer, they can afford to consume a more diverse set of goods and services than those in the B20,” she said.
However, people in the middle 50 per cent (M50) still regularly make trade-offs in consumption decisions between more aspirational goods and and more basic need goods.
“For example, if they have to decide on changing their tyre due to leakage, then they have to trade-off their other needs like going for a road trip or dining out,” she added.
The aspirational or “middle-income class” consumption was concentrated in the top 30 per cent of households, with equivalised income of above RM3,015.
Most of the quantitative analysis in the discussion paper were based in the 2014 Household Income Expenditure Survey, collected by the Statistics Department.
For more findings on the study, log on to KRI’s website at www.krinstitute.org. — Bernama