A recent publication on the economic realities in Malaysian households revealed a widening gap in the incomes of the rich, middle-class and poor in the country. Despite a reduction in income inequality, the earnings gap between these three classes has almost doubled over the past decade. The State of Households 2018: Different Realities, published by Khazanah Research Institute in October, looks at the different economic realities faced by Malaysians across the country, issues surrounding the workforce, and the nation’s economic development since independence.

Despite years of hovering over the status as a middle-income nation, Malaysia has not escaped the middle-income trap to project herself into high-income nation. The median household income for the country is estimated at MYR5,228 – less than GBP1,000 – per month. The publication also reports that between 2014 – 2016, all income groups have experienced a drop in residual income and are thus forced to cut back on consumption and spending, be it on food or lifestyle.

Unequal access to quality education is said to be one of the contributing factors to income levels. The institute mentioned that households with heads with higher education and high skills have incomes three to four times more than those without, further proving that education and skillset are the key to narrowing the income gap. However, access to education is no longer the only means to upward mobility, but the ‘starting position’ as well. This is another challenge, as those who are from a higher income background will generally start in ‘better’ jobs thus getting a headstart than those from a lower bracket.

The Institute has recommended a greater focus on human capital development as a means to address the disparity, stressing that this is crucial for the country to transition into a knowledge economy. In addition to that, there are also calls for employers to pay better wages, again to propel Malaysia to a high-income nation.

A detailed copy of the publication can be found here.

Commentary by Jennifer Wan, British Council Malaysia

The key student recruitment market in Malaysia for the UK higher education sector remains to be the middle-class and the rich income groups. Based on the publication, it is not hard to understand why the prospects of parents sending their children overseas for higher education have been impacted. Middle-income earners in Malaysia have always been trapped in the middle, with tough challenges to overcome if they would like to move up the social ladder. Coupled with inflation concerns, this group would always be seeking for more affordable options for their children’s higher education needs. The good news is, however, the fact that a higher education and international experience will provide one with a better chance in social mobility. This can be, and should be, a key selling point when we are promoting an overseas education to a Malaysian parent.