HUMAN capital development is the way out from inequality, said Khazanah Research Institute (KRI) during the launch of its report The State of Households 2018: Different Realities today.

“It’s not where you are born. It’s human capital. The key message is investment in ourselves,” said KRI chief economist and lead author of the report Allen Ng.

“The biggest, most important equaliser in dealing with inequality is human capital. It’s a broken record, and I’ve said it again and again and again but it’s true,” he said during the launch in Kuala Lumpur today.

Also present were KRI executive committee chairman Hisham Hamdan, managing director Shahril Ridza Ridzuan and research director Suraya Ismail.

The report found that despite declining poverty rates, relative poverty is still rampant.

While absolute poverty has been steadily declining, it is estimated that about three million households still live in relative poverty. The number has increased by about one million in 2016, from to two million in the 1990s.

“Throughout the world, you would think that inequality comes from physical wealth. That’s actually not true. Based on the latest numbers from the World Bank, it actually comes from human capital.

“You’d think that some countries would have oil and some don’t and therefore it’s unequal. We found that if you don’t improve on human capital, such as investing in education and healthcare, it would result in the worsening of inequality,” he said.

KRI found that the top 10% of all households earn 30% of all income, almost twice as much as the bottom 40, which earn 16% of all income.

The top 20% of households also earn half of all Malaysia’s income, Ng added

Lower income households earning below RM2,000 spend nearly 95% of income on everyday expenditure, particularly necessities, leaving them vulnerable with little savings against economic shocks or emergencies, the report said. – October 15, 2018.