MORE money needed to be spent on social protection to help the poor attain a decent standard of living, especially in the face of a Covid-19 induced economic crisis, Khazanah Research Institute said in a report.

The report, “Welfare in Malaysia Across Three Decades:  The State of the Households 2020 Part 1” found many households were living just slightly above the absolute poverty line and vulnerable to falling into severe deprivation.

“This vulnerability extends to middle-income households. There is a need to extend wider social welfare and protection in Malaysia,” said the report.

It added that the need to increase spending on social welfare and protection is further reinforced by the revision of the national poverty line index (PLI) in July.

Under the new methodology of counting, the mean value of the national PLI is RM2,208 compared to RM980 in 2005.

KRI found the annual social assistance expenditure needed to close the poverty gap rose to RM24.9 billion in 2019 from RM5.1 billion in 1989.

It estimated there were 1.7 million households which could be considered relatively poor in 2019, compared to the official figure of 1.2 million.

Poverty in relative terms refers to households with incomes below 50% of the median. Absolute poverty on the other hand is characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation, health, shelter and education.

Following the revision of the PLI in July, the absolute poverty rate increased to 7.6% in 2019 from 5.6% in 2016.

The number of households living in absolute poverty correspondingly increased to more than 400,000 from 16,700.

Report co-author Hawati Abdul Hamid said in a webinar yesterday, while cash aids are useful in alleviating the burden of the poor, they are only particularly helpful to those who are unable to work, such as the aged and the disabled.

It would be more feasible to create more decent jobs with a proper social protection system, she said.

She called for workers in the informal sectors to be included in the social protection system to ensure they too benefitted from the Employees Provident Fund and Socso.

Malaysia’s revised PLI was still lower compared to other countries with similar income levels, especially after factoring in changes in the consumption pattern, she said.

For example, mobile data once a discretionary item was now considered a necessity and  a part of the household expenditure.

KRI chairman Nor Mohamed Yakcop agreed social welfare expenditure was important but that it was more crucial to have a proper ecosystem in place, especially in times of crisis.

The former finance minister noted that close to 30% of graduates were turning to entrepreneurship or informal sectors instead of taking up jobs in the private sector or civil service.

There is a lack of a social protection ecosystem to provide them the necessary assistance, he said.

“They don’t have EPF or Socso and if they lose their jobs or migrate from one industry to another they don’t have an ecosystem that is supportive,” Nor Mohamed said.

“We have to transform our economy to have an ecosystem that can give them support and assistance.” – October 14, 2020.