What Does it Mean to be Poor in Malaysia?

Photo by: Afiq Fatah

On the surface, Malaysia is developing quite nicely. In Kuala Lumpur, we have skyscrapers, luxury malls, and Michelin Star restaurants. However the reality is not so clear cut. 

In 2020, there are two Malaysias.

While some Malaysians enjoy the benefits of our development, others are still living in unacceptable levels of poverty. On the ground, many Malaysians feel that their incomes aren’t enough to cover their needs. A director from one of Kuala Lumpur’s 40 soup kitchens reported that they served more than 700 people per night.

The Poverty Line

According to the World Bank, the poverty line is the level of income where people are no longer able to afford their basic food, clothing and shelter needs. This line is different for each country; some countries are wealthier than others, and have higher costs of living.

In July 2020, Malaysia raised the poverty line from RM980 to RM2,208 per month, increasing our poverty rate from 0.4% to 5.6%. 

Even a holistic model tested by the Malaysian government in 2016 found over 30% of Malaysia’s population to be socially and economically deprived

Photo by Deva Darshan

The new poverty line is definitely an improvement over the previous one; it provides a much more accurate reflection of the realities of living in Malaysia in 2020.

Yet, many have argued that even the new poverty line is far too low. Johor has recorded RM2,508 as its new poverty line, RM300 higher than the federal poverty line. The UN estimates that a more realistic estimation would put 16-20% of the population below the poverty line, compared to the official 5.6% statistic.

Even a holistic model tested by the Malaysian government in 2016 found over 30% of Malaysia’s population to be socially and economically deprived; this model took into account income levels, but also included access to education, healthcare, and standard of living.

The problem becomes even more hazy when considering the concept of the living wage, defined by Bank Negara Malaysia (BNM) as the minimum amount of money necessary to participate in society, and the minimum amount of money required to have the opportunity for personal and family development and for freedom over severe financial stress. 

BNM’s living wage line was set at RM2,700 for an individual, and RM6,500 for a couple with two children. 

This is far above the household poverty line of RM2,208.

Why This Matters: The Cycle of Poverty

Poverty is a cycle (“cyclical poverty”); if you’re poor, it also means that your children are more likely to end up poor. 

A child born into a poor family is more likely to experience changes in life, such as frequent moving, or changing of schools; they tend to live in more disadvantaged neighbourhoods; and have poorer access to extracurricular activities.

In Malaysia, 20.7% of children under 5 years old suffer from stunted growth, due to a lack of proper nutrition. 

Even without stunted growth, lack of nutrition affects children both physically and mentally. Children who grow up undernourished learn slower, and achieve lower academic results than their peers. This directly leads to proven lower earnings later in life. 

When they become adults, many who grew up in poverty find it difficult to compete in the job market with those who had better opportunities growing up. Many poorer young adults find themselves unable to perform internships, which often pay minimal wages. As a result, internships tend to be taken up by those economically privileged enough to go without a wage.

Higher poverty rates are also linked to higher crime rates. This doesn’t mean, however, that all crime is committed by poor people; in reality, the poor are more likely to become victims of violent crime. This feeds back into the poverty cycle; living in unsafe housing takes a mental toll, and can deeply affect a person’s academic and social outcomes.

In short: being poor isn’t just a financial issue, it makes you more likely to lose out in all areas of life, and makes it harder for you to escape poverty.

The Minimum Wage

Although our poverty line has been raised, our minimum wage — the minimum legal wage employers can pay their employees — has not.

What is the purpose of a minimum wage? According to Asst. Prof. Dr.  Sümer from Dokuz Eylül University, the minimum wage is meant to protect workers from exploitation and unrealistically low wages from employers. Minimum wage policies are a crucial part of reducing poverty, and ensuring that workers have a minimum acceptable standard of living.

Today, our poverty line stands at RM2,208 per month. In contrast, our minimum wage is a meagre RM1,100 or RM1,200, depending on where you live.

BNM’s living wage line was set at RM2,700 for an individual, and RM6,500 for a couple with two children. 

This is far above the household poverty line of RM2,208.

This means that if you live in the city and work two full-time jobs at minimum wage, you would only make RM200 more than the new poverty line. 

In KL, RM200 is a round of groceries from Tesco for a family of four.

In light of this, MTUC secretary-general J Solomon praised the revision of the poverty line, but argued that the minimum wage needed to be increased too, as it did not reflect the actual costs of living in Malaysia today.

There is clear overlap in what we consider living wage and minimum wage; are freedom from financial stress and opportunity for development not also what we aim to alleviate for those in poverty? This is something we all need to seriously consider moving forward.

But What About Savings?

One common myth is that many people are in poverty simply because they don’t know how to save.

In one survey, 61% of Malaysian millennials only had savings to last three months or less. 37% of those surveyed had less than one month’s income saved up. Many of us are, quite literally, one or two major emergencies away from poverty.

This isn’t just the fault of millennials not saving enough. Actually, youth incomes have stagnated, and in some cases, decreased. Whilst the cost of living in Malaysia has increased steadily, graduates’ real incomes have actually fallen. This means that today’s graduates are less able to save up and afford a decent standard of living compared to graduates from just 10 years ago.

Today’s graduates are quite literally making less money than they would have in the middle of a once-in-a-lifetime economic crisis.

Yet, the overall wage per person in Malaysia has actually grown. Wages and income are rising, but Millennials and Gen Z are not benefiting from these increases. Our national growth is, put simply, not being distributed to our youth; this is not a good sign for the next generation’s future financial security.

Psychological research suggests that living in poverty actually makes it harder for people to make long-term financial decisions.

If someone is struggling financially, they are thinking of food, of rent, and of the things they need to spend on right now; there is no space to think long-term. Poverty also brings with it instability and insecurity, which makes it more difficult to plan for unexpected events in the future

If you’re struggling to think about how to feed yourself right at this moment, how can you possibly consider how to feed yourself six months from now?

That’s exactly where the minimum wage helps. By providing a minimum salary which allows for a decent living, those in poorer income groups are better equipped to deal with the challenges of modern life.

What we can do about it

Malaysia’s democratic system means that each of us have a representative in the Dewan Rakyat. You can find your representative on this website here and contact them with your concerns and demands. 

Telling our representatives what we want is a key part of democracy, and everyone should make the most of our access to our representatives. If they’re not performing, or proposing bills you don’t support, vote them out in the next General Election. 

The new poverty line is definitely a more accurate reflection of Malaysian poverty in 2020. It is a positive step, as now the government has more accurate numbers to use in designing and planning its new 12th Malaysia Plan, 2021-2025 to be presented early next year. It’s important that we keep a critical eye on future developments.

Minimum wage policies and poverty alleviation affects all of us, even if we’re not under the poverty line. We all benefit when our neighbours’ children are fed and are well educated. 

Reducing poverty reduces crime rates, creates a healthier population, creates a more globally-competitive rakyat, and ensures that every one of us is on a more level playing field. More importantly, it allows all Malaysians to live their lives with dignity and security.

I think that’s the kind of Malaysia we all want to live in.

Featured image by Afiq Fatah