Malaysia Income Classifications
Ever wondered whether you fall into the poor, middle income, or rich group in Malaysia? When you finish reading this article, you will know exactly where you stand.
As of 14th April 2021, Malaysia has a total population of approximately 32,689,620 according to worldometers. This marks Malaysia as a highly dense country as a total of about 0.42% of the world’s population is located in Malaysia, which translates to approximately 255 people per square mile (mi2).
In a country as dense as this, the Malaysian government has to create a system that ensures that the lower income bracket of the population gets the help and attention they need in form of social security schemes, formulation of national development plans, and even affordable homes schemes among other efforts.
One of the systems put into place in identifying those in need in Malaysia is the income classification system. Malaysians are placed into three different income classifications brackets in Malaysia – the B40 (bottom 40%), M40 (middle 40%) and T20 (top 20%).
Image source: comparehero.my
How the government decides which bracket you fall into depends on the Household Income & Basic Amenities Survey Report (HIS) which is conducted every 5 years
What is B40?
B40 literally means the bottom 40% of the income group in Malaysia. So how does the Malaysian government decide if you are part of the B40 group? Prior to July 2020, in order to qualify as part of the B40 group you would have to be earning between RM3,000 and RM6,275.
The government however realised that the figure was unrealistic as depending on where you live, a monthly income of RM6,275 can either be more than enough for you to live on, or be barely enough to get by.
Hence in July 2020 after surveying a total of 2.91 million B40 households, the Department of Statistics Malaysia (DOSM) further broke down the B40 income levels by categories to recognise those who are truly in need.
What is M40?
Following B40 is M40, which is the middle 40% of the income group in Malaysia. These are the middle income earners who represent 40% of Malaysia’s population in income level.
The M40 category is usually the one that get the least benefits when it comes to government initiatives.
Due to the high cost of living, many of these assumed middle income earners are in actuality also scrapping by as they are urban dwellers who actually experience high cost of living, but are unable to apply for any of the government benefits nor initiatives as they do not subscribe to the B40 bracket.
Recognising this in their latest Household Income & Basic Amenities Survey Report (HIS), in July 2020 the Department of Statistics Malaysia (DOSM) after surveying 2.91 million households, broke down the M40 income classification categories to recognise those who may be in need despite apparently earning above average.
Prior to July 2020, the M40 group was recognised as households that had an earning bracket of between RM6,276 and RM13,148 per month. But after the July 2020 revision, the middle income bracket is defined as below.
What is T20?
The final income category is T20 – the top 20% of the income level group in Malaysia. Representative of the top 20% of the income earners in Malaysia, the T20 group was categorised as those who earned above RM13,149 prior to the July 2020 revision.
After the survey however, the T20 group was broken down into the below two classifications:
Malaysia to Become A High Income Nation by 2030
Image source: malaysia.gov.my
The Malaysian government has put into place all these classifications with the aim of aiding those in need which will in turn help Malaysia to become a high income nation. Some of the benefits that Malaysians will get to experience as a high income nation is reduced poverty, higher income levels, better education, and on the government’s side, improved finances.
According to the World Bank Group, Malaysia is on track to becoming a high income nation between the years 2024 and 2028. The current gross national income per capita in Malaysia stands at approximately RM45,920, which falls short of the high income threshold definition by only about RM5,511.
To ensure that this gap is minimised and that Malaysia achieves the status of a high income nation, the government will need to focus on the sustainable growth of the Malaysian economy.
The Cons of Becoming a High Income Nation
There are however disadvantages to becoming a high income nation. The biggest downside is the increased cost of living due to inflation if the economic growth is not sustainable. In order to ensure that Malaysia truly becomes a high income nation, the government will need to put in place plans to ensure that inflation is kept to a minimal, otherwise the increased cost of living will render the increased income level meaningless.
The second drawback to becoming a high income nation is the possible increase in disparity between the low and high income brackets. This is because the T20 typically own more assets, and hence tend to grow in wealth as the economy grows. In order to mitigate this, there will need to be proper policies of redistributions in place.
One of the final biggest drawback to becoming a high income nation is the reduced quality of life. As the Malaysian government gears the society towards achieving economic growth, the citizens may experience a decline in quality of life, mental health, and physical health. As the citizens of Malaysia maximise their working hours, they may reduce their physical activities and increase unhealthy eating habits, which when combined makes for the worst possible health impact.
Gearing Malaysia Towards Becoming a High Income Nation
Malaysia has come a long way historically in the growth of its economy from focussing on the agricultural sector to now being in the industrial sector. To ensure that Malaysians obtain the full benefits of becoming a high income nation, the government will need to ensure that the economy is sustainably driven to minimise the possible negative impacts of becoming a high income nation.
References:
• https://chedet.cc/?p=470
• https://www.economicshelp.org/macroeconomics/macroessays/evaluate-benefits-growth/
• https://www.malaymail.com/news/malaysia/2020/07/10/income-inequality-in-malaysia-widened-even-while-median-household-income-ro/1883232
Other referent sites the designer can take inspiration from when creating the income classification graphs:
• https://syncwealth.io/t20-m40-b40-which-one-are-you/
• https://www.comparehero.my/budgets-tax/articles/t20-m40-b40-malaysia
(Written by Isabelle, 6th May 2021)
