In Malaysia, income disparity widening gap between rich and poor, UM paper shows

Lee (right) and Muhammed noted that the top 10 per cent of property buyers controlled more than 40 per cent of the total value of property purchases in 2011, up from 35 per cent in 1997. ― Picture by Choo Choy May
Lee (right) and Muhammed noted that the top 10 per cent of property buyers controlled more than 40 per cent of the total value of property purchases in 2011, up from 35 per cent in 1997. ― Picture by Choo Choy May

PETALING JAYA, Nov 5 — The national household income survey (HIS) that shows declining inequality does not give the full picture of current trends as the gap between the rich and the poor is widening in home ownership and in public and private sector wages, a joint paper by the University of Malaya (UM) and Khazanah Research Institute has revealed.

The paper titled “Is inequality in Malaysia really going down?” observed that the value of residential property purchased by high-end buyers has grown more rapidly than the property purchased by low-end buyers over the years.

“We obtain evidence of steadily rising earnings inequality in both private and public sectors in the 2000s,” said the authors — UM department of development studies senior lecturer Dr Lee Hwok Aun and Khazanah Research Institute director of research Dr Muhammed Abdul Khalid — in the abstract of the paper that was presented at UM today.

“Private sector wage inequality has grown, especially at the uppermost segments, while the ranks of managers and professionals have expanded disproportionately faster in the public sector.

“Passenger vehicle sales data show increasing proportions of luxury cars. Property sales also show rising concentration in the upper rungs,” they added.

Lee and Muhammed noted that the top 10 per cent of property buyers controlled more than 40 per cent of the total value of property purchases in 2011, up from 35 per cent in 1997.

The share of the bottom 20 per cent, however, hovered at just below five per cent throughout that period.

Sales of luxury cars costing more than half a million ringgit have also increased, making up 0.1 per cent of the total number of vehicles sold in 2006 to 0.2 per cent in 2011.

Other high-end brands costing between RM100,000 and RM500,000 recorded rising sales too.

The bottom half of Amanah Saham Bumiputera (ASB) unit holders, the largest unit trust fund in Malaysia, controlled just two per cent of the units in 2012, down from about three per cent in 2008.

However, the top 10 per cent controlled a whopping 77 per cent in 2012, down from 78 per cent in 2008.

According to the paper, the Gini coefficient of Employees Provident Fund (EPF) savings accounts, the largest retirement fund in the country for private sector workers, rose from 0.64 in 2006 to 0.66 last year, higher than the Gini coefficient of gross household income of 0.431.

The lower the score is between zero and one in the Gini coefficient, which measures the inequality of wealth distribution, the lower the inequality.

Similarly for the government sector, the proportion of top management — which earns the highest income — and management and professionals increased from 1999 to 2012, while the proportion of support staff dropped, the paper showed.

The paper also observed more rapid growth in high-ranking positions, noting that top management and management expanded annually by 13.1 per cent and 23 per cent respectively, while the upper professional, lower professional and support staff grew only by 9.2 per cent, 9.6 per cent and 1.4 per cent respectively.

“Inequalities may have been moderated by progressive salary adjustments in 2006, which gave relatively larger increments to lower ranked employees,” they said.

The authors noted that household income inequality has been dropping since 2004 and that the Gini Coefficient Index recorded its lowest ever score in 2012 at 0.431.

Popular perception, however, is that inequality is rising, they said.

Lee and Muhammed sought to measure inequality in personal earnings and wealth that were not measured in the HIS, noting that the country’s official report made no distinction between earned income and gross income, which includes non-earned income like property rentals.

“Overall, our findings are consistent with general perceptions of rising personal inequality, while also highlighting how inequality is multi-faceted.

“Discrepancies with the officially estimated fall in inequality need not impugn the validity of either data source, but urge critical evaluation of the HIS,” the authors said, referring to the household income survey (HIS).

Lee said a possible reason for declining household income inequality was that young people who are in the workforce may be living with their parents, hence their earned income may have been recorded as gross household income.

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