Higher median household income means little to B40 group, says economist

Sharon Tan

The World Bank’s growth projection of Malaysia’s gross domestic product this year indicates there is growth in income and in spending. Simply put, higher GDP means higher spending. – The Malaysian Insight file pic, October 11, 2017.

A RISE in median monthly household income is a positive counter to the rising cost of living, but unequal income distribution may render it meaningless to the lower income group.
“Wages or rather total income did rise but not as fast as people would like. But it still did,” Hafiz Noor Shams, a researcher at FT Confidential Research, told The Malaysian Insight.

On the impact of a higher median monthly household income, he said: “If wages didn’t rise, things would be worse with rising living costs.” 

On Monday, the Statistics Department announced that the median monthly household income of Malaysians last year improved by 6.6% to RM5,228 from RM4,585 in 2014.
Chief statistician of Malaysia Dr Mohd Uzir Mahidin said the mean monthly household income last year also increased by 6.2% to RM6,958 from RM6,141 in 2014.     

“Although the median and the mean household income rose in 2016, it moved at a moderate pace due to the slower economic performance compared with 2014,” he said at the launch the Household Income and Expenditure Statistics Malaysia 2016.

While mean household income means average household income, median household income is a better representative value of household income. In other words, median household income is more reflective of “middle Malaysia”.

As such, a 6.6% hike in the median household income means that the average Malaysian experienced a pay hike of some sort last year.
“If median income is rising faster than consumer price inflation (CPI) (CPI for August was at 3.7%), which is the increase in the average price level of a basket of goods and services consumed by a representative household, then the average Malaysian household is better off in the sense of staying ahead of inflation, or coping with price increases, in other words.
“However, because of unequal income increases and spending behaviour among different households, some families, especially the B40 and the lower segment of the M40, will be worse off because their income growth lags the rise in cost of living,” said Dr Yeah Kim Leng, professor of economics at Sunway University Business School.
The World Bank projection of Malaysia’s gross domestic product (GDP) to grow by 5.2% in 2017 and 5% in 2018 indicates there is growth in income and in spending, he said.
An economist who did not wish to be named said bigger GDP meant bigger spending.
“Spending in GDP is also income. The growth in GDP is also an indication of growing income in the economy on the whole,” he said.
The World Bank East Asia and Pacific Economic Update October 2017 reports that GDP growth in Malaysia accelerated during the first half of 2017 to 5.7% (year-on-year), supported by strengthening domestic and external demand.
As a result, the report says the Malaysian economy is expected to grow by 5.2% in 2017.
The World Bank also gives Malaysia a positive outlook as the economy continues to experience broad based growth across a range of diversified sectors.

However, the report also cautions that as an open economy, Malaysia is open to risks relating to changes in the global economic outlook and is vulnerable to shifts in external demand and market sentiment. – October 11, 2017.

Sign up or sign in here to comment.