A closer look at the latest data on ethnic income gap

This article first appeared in The Edge Malaysia Weekly, on August 3, 2020 - August 09, 2020.
A closer look at the latest data on ethnic income gap
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SOME may be surprised by the fact that bumiputera households made up 53.5% of the 1.72 million households in Malaysia that had more than RM10,000 in monthly gross income in 2019.

Yet, being the majority at 69.3% of 29.38 million Malaysian citizens and 65.1% of 7.28 million households, the ethnic group ranks high in both things to be proud of, such as the most number of graduates and people earning high incomes, and areas that need to be worked on, such as relative poverty and graduate unemployment. Bumiputera individuals made up 62.6% of the 32.52 million Malaysian population, which included 3.14 million non-citizens of different nationalities (who collectively exceed the 2.01 million Malaysians who are Indian).

According to our estimates based on data released in the 2019 Household Income and Basic Amenities Survey (HIS) report by the Department of Statistics Malaysia (DoSM), there were about 918,400 bumiputera households with a monthly gross income of at least RM10,000 in 2019, or 53.5% of all households with that level of income last year — trumping 656,200 Chinese households (38.2%), 144,000 Indian households (8.4%) and 8,300 households of other ethnicity (0.48%).

There were also more bumiputera households with a gross income of at least RM15,000 a month than all other ethnic groups in Malaysia: 345,600 households or 47.5% of 727,700 households with that level of gross income in 2019. That compares with about 316,800 Chinese households (43.5%), about 65,500 Indian households (9%) and 2,800 households whose head of household is of other ethnicity, The Edge’s estimates show (see tables).

On the flip side, 932,600 or 71.6% of the 1.3 million households that earn less than RM3,000 a month last year were also bumiputeras. That compares with about 245,100 Chinese households (18.8% of total households earning below RM3,000 a month), 97,000 Indian households (7.4%) and 18,200 households of other ethnicity (1.4%).

While bumiputeras had more graduates (degree plus diploma) than other ethnic groups put together, it is worth noting that due to the larger population base, only 16.9% of bumiputeras (3.44 million) were graduates compared with 18.8% of Chinese (1.26 million) and 18.3% of Indians (368,900).

There was also a larger proportion of bumiputera households in rural areas, at 27.4% — above the national average of 20.2% — compared with only 6.4% Chinese and 5.5% Indians.

It is not immediately known just how much the average is weighed down by strata as well as the larger base effect. The RM3,828 median and RM6,561 average (mean) rural household income were both lower than the national level of RM5,873 median and RM7,901 average. The urban median income was RM6,561 and average, RM8,635.

The DoSM — which described the “wide economic gap between ethnics” as “one of the nation’s biggest challenges” in the HIS report released in July — noted that bumiputeras’ income were, on average, significantly lower than other ethnic groups. It also noted that “accurate and detailed information is needed to formulate policies and precise programmes”.

While the HIS report summary did not elaborate on intra-ethnic inequality, it can be seen from the appended data sets.

The disparity within an ethnic group was the greatest among the Chinese in the highest income class. While making up only 16.8% of total Chinese households, the roughly 316,800 households with a more than RM15,000 monthly gross income accounted for 42.7% of income share for the ethnic group, according to DoSM data.

The roughly 65,500 Indian households with the same income range took home a 33.5% income share for their ethnic group while making up only 11% of total Indian households. The income share was 23.9% among the roughly 345,600 bumiputera households earning at least RM15,000 a month, which made up 7.3% of total Bumiputera households. Collectively, these households made up the top 10% of households but accounted for 30.8% of income share.

At the opposite end, the 1.3 million households earning below RM3,000 a month only took home 5.1% of income share while making up 17.9% of total households.

Making sense of low Selangor PLI

Arguing that instances of poverty among bumiputeras in Sabah and Sarawak are higher than that of Malays in the peninsula, Ong Kian Ming, Bangi Member of Parliament, on July 20 proposed in the Lower House that the poverty line income (PLI) figure for bumiputeras be further refined into three categories: bumiputera Malays, bumiputera Sabah and bumiputera Sarawak to deepen understanding on poverty among the three distinct groups and derive more effective policy action in tackling poverty.

Pointing out that the PLI for Selangor at RM2,022 was lower than the country’s PLI of RM2,208 despite a much higher cost of living in the Klang Valley, Ong also asked that the PLI for the states be improved to provide a better picture of reality. He also questioned if the situation on the ground would indeed reflect a PLI of RM2,216 for Kuala Lumpur — only RM8 above the country’s – when the PLI for Terengganu was much higher at RM2,507 as was RM2,537 for Sabah and RM2,131 for Sarawak.

Without more granular data, it is tough to draw deeper conclusions from the HIS report.

Interestingly, only about 352,195 or 21.7% of households in Selangor fell into the bottom 40% (B40) income category, our back-of-the-envelope calculations using percentages provided in the HIS report show.

Contrary to the 20:40:40 breakdown for the top 20% (T20), middle 40% (M40) and bottom 40% (B40), our tabulation based on data in the HIS report shows that 33.2% or about 540,000 of 1.63 million households in Selangor were in the T20 high-income category, 45.1% were M40 while only 21.7% were B40 low-income earners.

Similarly, about 228,000 or 47.4% of 481,713 households in Kuala Lumpur were deemed T20 and 44.7% were deemed M40 compared with only 7.9% in B40. About 45.5% of 32,000 households in Putrajaya were T20, another 45.5% was M40, leaving only 9.1% or about 2,910 households in the B40 income category, The Edge’s estimates show. It is not immediately known how much a small base impacted 2017 survey findings by the Ministry of Health and Unicef Malaysia that show highest instances of childhood stunting at 28% among children aged 12 to 23 months in Putrajaya.

What is certain is the HIS report is a must-read for anyone interested in getting a better perspective on the country’s ethnic-income narrative.


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