A RM700 cut in monthly income is enough to plunge thousands of households into absolute poverty, said a Khazanah Research Institute (KRI) researcher today.

Malaysia’s average absolute poverty line is RM2,200 and relative poverty line is RM2,900. 

Hawati Abdul Hamid noted the small difference of RM700 between the two indicates there are many vulnerable households which could easily fall into absolute poverty. 

“The difference is just about RM700. Let’s say there is an income shock of about RM700 we can see another 800,000 households easily falling into poverty,” she said on a KRI webinar today. 

She was responding to a question on whether more people were expected to fall below the poverty line due to Covid-19. 

KRI’s Welfare in Malaysia Across Three Decades:  The State of the Households 2020 Part 1 report estimates that there are 1.7million household which could be considered relatively poor as of 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 poverty line index (PLI) by Putrajaya in July, the absolute poverty rate increased to 5.6% in 2019  from 7.6% in 2016. 

Under the new methodology of counting, the mean value of the national PLI is set at RM2208 compared to RM980 under the methodology devised in 2005. 

As such the number of households living in absolute poverty increased  from 16,700 under the old methodology compared  to more than 400,000 under the new PLI. 

KRI’s report notes that although there are fewer households living in absolute poverty, relative poverty persists. 

It added that many of these households only had incomes slightly above the absolute poverty line, and are vulnerable to falling back into severe deprivation. – October 13, 2020.