the state of households ii

State of Households II19 September 2016

Khazanah Research Institute

2

Kha

zana

h R

esea

rch

Inst

itute

Authors• Intan Nadia Jalil• Dr Muhammed Abdul Khalid• Yap Gin Bee• Jarud Romadan Khalidi• Nazihah Muhamad Noor• Tan Theng Theng• Adibah Abdulhadi

3

Kha

zana

h R

esea

rch

Inst

itute

Executive Summary

4

Kha

zana

h R

esea

rch

Inst

itute

Executive SummaryHouseholds are better off

o Compared to 2012, households in 2014 have a higher median (RM4,585) and average income (RM6,141). The growth in the incomes of the lowest 40% of households (the B40) has been the fastest.

o Cash transfers (like BR1M) have improved incomes, particularly among the less well-off. o The gap between rural and urban households and households of different ethnic groups is

closing and the Gini coefficient (a common measure of inequality) has improved to 0.401. o Access to basic infrastructure (eg schools and public health facilities) continues to improve

and we are a more wired nation as more people and households have internet access. o Poverty has declined and hardcore poverty is minimal although the poverty rate for Orang

Asli in the Peninsula and the Bumiputeras in Sabah and Sarawak are still a concern. o Unemployment, which has increased slightly, is still low at 3.1% in 2015.

More women have entered the workforceo The participation rate of women in the workforce is now (2015) 54.1% and peaks at 87.7%

for young women with a tertiary education.

We live longero Life expectancy at birth is 77.4 years for women and 72.5 years for men. Men who are 60

years old can expect to live to 78.4, and women, 80.9 years. It is a far cry from 1970 when the life expectancy at birth for men was 61.6 years.

5

Kha

zana

h R

esea

rch

Inst

itute

Executive SummaryBut some disparities remain

o 84.8% of Kelantan and 81.1% of Perak households earn less than RM6,000 a month, whereas 64.4% of Kuala Lumpur and 69.2% of Putrajaya households earn more.

o Disparities in wealth (measured by EPF and ASB savings) are more pronounced than that of income (reflecting the fact that those with higher incomes can save more).

o There is a concern that many will not have saved enough for a 20-year retirement and are taking on too much debt.

Low wages and youth unemployment are of concerno The median salary is only RM1,600 per month, although those who live in an urban area or

are educated earn more.o Youth unemployment, while still low, is, at 3.4% in 2014, higher than overall

unemployment, and a large proportion (33.8%) of the unemployed have a tertiary education.

Food prices have risen faster than overall inflationo In selected urban areas, the cost of feeding a family of five with a diet that meets the

Ministry of Health’s recommendations is high compared to the poverty line. o We have also seen price anomalies in imported and locally produced foodstuffs like

vegetables, milk, and chicken that deserve further investigation.

Birth rates are falling: o Coupled with our longer life expectancy this means that we are becoming an ageing

population. As a society we will have to learn to balance and prioritise public spending between the needs of the young and the needs of the old.

6

Kha

zana

h R

esea

rch

Inst

itute

Contents

Table ofContents

Kha

zana

h R

esea

rch

Inst

itute

1. State of Households

2. The Malaysian Workforce

3. Population Ageing

• State of Households• State of Household incomes• Inequality• Household Expenses• Households and Food• Household Savings and Debt

• The Malaysian Workforce• Women in the Workforce

• Population Ageing

8

Kha

zana

h R

esea

rch

Inst

itute

State of Households

9

Kha

zana

h R

esea

rch

Inst

itute

Malaysia continues to prosper

Although nominal GDP per person fell from USD10,432 in 2012 to USD9,766 in 2015 at market exchange rates, it rose from USD23,100 to USD26,891 in purchasing power parity (PPP) terms.

+State of Households

Chart 1: Index of Malaysian nominal GDP and GDP per person, 1980 – 2015

1980

1985

1990

1995

2000

2005

2010

2015

0

500

1,000

1,500

2,000

2,500GDP

GDP per person

Country USD CurrentInternational $

Costa Rica 10,630 15,377

World 9,996 15,465

MALAYSIA 9,766 26,891

East Asia & Pacific 9,337 15,693

Turkey 9,130 19,618

Mexico 9,009 17,277

Brazil 8,539 15,359

Upper middle income 7,737 15,697

Table 1: Nominal GDP per person for middle income countries, 2015

All sources and notes pertaining to data and measurement may be found in the State of Households II

1980 = 100

10

Kha

zana

h R

esea

rch

Inst

itute

Incomes for the B40 have grown the fastest


Chart 3: Index of nominal GDP per person and nominal average household income, 1979 – 2014

1979

1984

1987

1989

1992

1995

1997

1999

2002

2004

2007

2009

2012

2014

0

200

400

600

800

1,000

1,200

1,400

Middle 40%

Top 20%

GDP per person

Bottom 40%

1979 = 100

11

Kha

zana

h R

esea

rch

Inst

itute

GDP and GDP per person improved in all states


Chart 5: Nominal GDP, by state, 2012 and 2014

Chart 6: Nominal GDP per person, by state, 2012 and 2014

Perlis

Kelantan

Terengganu

Melaka

Kedah

N. Sembilan

Pahang

Perak

P. Pinang

Sabah

Johor

Sarawak

K. Lumpur

Selangor

0 50 100 150 200 250

Nominal GDP

RM b

Kelantan

Kedah

Sabah

Perlis

Perak

Terengganu

Johor

Pahang

N. Sembilan

Melaka

Selangor

P. Pinang

Sarawak

K. Lumpur

0 20 40 60 80 100

20142012

Nominal GDP Per Person

RM k

12

Kha

zana

h R

esea

rch

Inst

itute

Most households have more than one breadwinner


Chart 7: Average household size and number of income recipients, 2014

Chart 8: Household distribution, by number of income recipients per household, 2014

0 1 2 3 4 5

3.7

4.2

4.3

4.4

4.5

Average Household Size

Bumiputera

Others

MALAYSIA

Indians

Chinese

0 1 2

1.7

1.8

1.8

2.0

1.8

Number of Income Recipients

One43.3%

≥ Five1.2%

Four4.1%

Three12.2%

Two39.2%

13

Kha

zana

h R

esea

rch

Inst

itute

Household incomes grew faster than GDP per person


2010 2011 2012 2013 20140

1000

2000

3000

4000

5000

6000

3626.16674804688

4585

5000

6141

3456.50972885555

4149.94720168955

4766.0656128366

5558.30441997285

Nominal average household income

Real average household income

Nominal median household income

Real median household income

Nominal GDP per person per month

Real GDP per person per month

RM

Chart 9: GDP per person and household incomes, nominal and real terms (RM)

14

Kha

zana

h R

esea

rch

Inst

itute

Hardcore poverty has almost disappeared


Chart 10: Hardcore and total poverty, 1984 – 2014

1984 1987 1989 1992 1995 1997 1999 2002 2004 2007 2009 2012 20140%

5%

10%

15%

20%

25%

Total poverty2014, 0.6%

Hardcore poverty2012, 0.2%

15

Kha

zana

h R

esea

rch

Inst

itute

Poverty is not just income+State of Households

Dimension IndicatorEducation Years of schooling

School attendanceHealth Access to health facilities

Access to clean drinking water supply

Living Standards Condition of living quarters

Number of bedroomsToilet facilityGarbage collection facility

Transportation

Access to basic communication tools

Income Mean monthly household income

Infrastructure continues to improve

o Rural households in Kedah, Kelantan, Sabah, Sarawak, and Terengganu have improved access to pipe water and are now closer to secondary schools and health facilities

We are a wired nation

o 44.3% of all households have internet access, 52.8% have laptops, and 65.9% have Astro

o According to MCMC around one in three mobile phones users use a smartphone

o Broadband penetration rate is 72.2% as at 2Q 2015

The Multidimensional Poverty Index (MPI), looks at other indicators

16

Kha

zana

h R

esea

rch

Inst

itute

B40 households depend on current transfers the most


Chart 15: Main sources of income for heads of households, 2012 and 2014 (percentage)

Chart 16: Sources of household income for the B40 households, 2009 – 2014 (percentage)

2009 2012 20140

102030405060708090

100

48.1 47.8 49.5

20.9 21.5 19.2

13.2 12.8 12.6

17.8 17.8 18.8

Per

cent

age

of H

ouse

hold

In

com

e

Paid employment

Self-employment

Property and investments

Current transfers received

2009 2012 20140

20

40

60

80

100

69.9 67.0 66.1

13.3 16.8 14.8

10.4 9.4 11.16.5 6.8 8.0

Per

cent

age

of H

ouse

hold

In

com

e

Paid employment

Self-employment

Property and investments

Current transfers received

2009 2012 20140

20

40

60

80

100

72.8 72.1 69.6

13.4 16.2 15.8

11.1 9.0 11.42.7 2.8 3.3

Per

cent

age

of H

ouse

hold

In

com

e

Current transfers receivedProperty and investmentsSelf-employment

Paid employment

Chart 17: Sources of household income for the M40 households, 2009 – 2014 (percentage)

Chart 18: Sources of household income for the T20 households, 2009 – 2014 (percentage)

Property income includes “imputed rent”, which is based on the estimated value of the owner-occupied house.

%

% %

2012 20140

102030405060708090

100

66.6 65.0

17.2 16.0

9.7 11.46.5 7.6

Per

cent

age

of H

ouse

hold

In

com

e

Current transfers receivedProperty and investmentsSelf-employment

Paid employment

%

17

Kha

zana

h R

esea

rch

Inst

itute

The income gaps are narrowing+State of Households

Chart 22: Urban-rural gap across time, 1995 – 2014

Chart 24: Income gap, by ethnicity, 1995 – 2014

1995

1997

1999

2002

2004

2007

2009

2012

2014

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Per

cent

age

of M

edia

n H

ouse

hold

Inco

me

Rural

Urban

1995 1997 1999 2002 2004 2007 2009 2012 20140%

20%

40%

60%

80%

100%

120%

140%

160%

Per

cent

age

of M

edia

n H

ouse

hold

Inco

me Chinese

Indians

BumiputeraOthers

18

Kha

zana

h R

esea

rch

Inst

itute

Gini coefficients have fallen+State of Households

Chart 23: Gini coefficients by strata, 1970 – 2014

1970

1974

1976

1979

1984

1987

1989

1992

1995

1997

1999

2002

2004

2007

2009

2012

2014

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Malaysia

Urban

Rural

The Gini coefficient has dropped to 0.401 in 2014 from 0.430 in 2012.The Gini coefficient was the highest in 1976 at 0.557.

o For urban households, the Gini fell by 2.6 percentage points from 0.417 to 0.391 in 2014.

o Rural households also experienced a similar drop of 2.7 percentage point from 0.382 to 0.355 in the same time period.

19

Kha

zana

h R

esea

rch

Inst

itute

Household income distribution has improved


Chart 20: Household income distribution

< R

M 1

k

1k -

< 2

k

2k -

< 3

k

3k -

< 4

k

4k -

< 5

k

5k -

< 6

k

6k -

< 7

k

7k -

< 8

k

8k -

< 1

0k

≥ 10

k

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Monthly Household Income Categories

Dis

tribu

tion

of In

com

e

22.6% 55.2%

74.1%

< R

M 2

k

2k -

< 3

k

3k -

< 4

k

4k -

< 5

k

5k -

< 6

k

6k -

< 7k

7k -

< 8

k

8k -

< 9

k

9k -

< 1

0k

10k

- <

11k

11k

- <

12k

12k

- <

13k

13k

- <

14k

14k

- <

15k

≥ 15

k

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Monthly Household Income Categories

11.7%

42.1%

65.0%

2012 2014

20

Kha

zana

h R

esea

rch

Inst

itute

Rich states, poor states+State of Households

PutrajayaK. LumpurSelangor

LabuanJohor

MelakaMALAYSIA

P. PinangN. Sembilan

SarawakSabah

TerengganuKedah

PahangPerlisPerak

Kelantan

0 10 20 30 40 50 60 70 80 90

30.8 35.6

48.0 53.0

60.0 63.1

65.0 65.9

73.5 73.9 74.0

77.1 79.1

80.3 80.3 81.1

84.8

2k - < 3k 3k - < 4k 4k - < 5k 5k - < 6k Series6

Percentage of Households

%

21

Kha

zana

h R

esea

rch

Inst

itute

Rich states, poor states+State of Households

PutrajayaK. LumpurSelangor

LabuanJohor

MelakaMALAYSIA

P. PinangN. Sembilan

SarawakSabah

TerengganuKedahPerlis

PahangPerak

Kelantan

0 10 20 30 40 50 60 70 80 90

69.2 64.4

52.0 47.0

40.0 36.9

35.0 34.1

26.5 26.1 26.0

22.9 20.9

19.7 19.7

18.9 15.2

RM 6k - < 7k 7k - < 8k 8k - < 9k 9k - < 10k 10k - < 11k 11k - < 12k 12k - < 13k 13k - < 14k 14k - < 15k ≥ 15k

Series11

Percentage of Households

%

22

Kha

zana

h R

esea

rch

Inst

itute

Some households are more equal than others


Chart 29: Average household size and household income, by ethnicity, strata, and gender, 2012 and 2014

Median

2012

Average household income

2014

Average household income Average

household size MedianFemale Male Malaysia Ethnicity Malaysia Male Female

3,626 3,671 5,248 5,000 National 6,141 6,355 4,923 4.3 4,585

3,282 3,404 4,654 4,457 Bumi 5,548 5,717 4,580 4.5 4,214

4,643 4,508 6,700 6,366 Chinese 7,666 7,988 5,821 3.7 5,708

3,676 3,304 5,624 5,233 Indian 6,246 6,511 4,919 4.2 4,627

2,762 4,097 3,786 3,843 Others 6,011 6,236 5,125 4.4 4,372

Urban

4,239 6,010 5,742 National 6,833 7,071 5,478

4,129 5,502 5,301 Bumi 6,340 6,520 5,275

4,646 6,985 6,622 Chinese 7,933 8,275 6,006

3,840 5,885 5,491 Indian 6,455 6,732 5,073

5,674 5,230 5,323 Others 7,195 7,316 6,663

Rural

2,387 3,225 3,080 National 3,831 3,961 3,109

2,368 3,148 3,010 Bumi 3,787 3,908 3,130

2,795 3,951 3,806 Chinese 4,389 4,581 2,991

2,224 3,539 3,271 Indian 3,674 3,818 2,906

2,149 2,487 2,432 Others 3,204 3,473 2,377

Average household income

Min: 2,149 Max: 8,275

23

Kha

zana

h R

esea

rch

Inst

itute

Richer older men+State of Households

Chart 30: Household median income, by age of head of household (RM)15

– 2

4

25 –

29

30 –

34

35 –

39

40 –

44

45 –

64

≥ 65

Tota

l0

1,000

2,000

3,000

4,000

5,000

6,000

2004 2007

2009 2012

2014

RM

24

Kha

zana

h R

esea

rch

Inst

itute

One in five EPF members nearing retirement have less than RM10,000 in retirement funds. Wealth inequalities far exceed income inequality


Chart 31: Gini coefficients, 2014

ASB

EPF

Household Income

0.836

0.658

0.401

In 2014, Active EPF members aged 51 – 55 had average savings of RM159,952Excluding the richest 1.6% (6,413 members), the average was RM137,605.

As at February 2016, the savings of the top 20,867 (0.3% of members) was more than the savings of the bottom 3,117,610 (47%) members.

The low savings reflect low incomes. As at December 2015:o 91% active EPF members earned less

than RM6,000 a month (2013: 96%);o 83% earned less than RM4,000 (2014:

85%); ando 58% earned less than RM2,000 (2013:

62%).

Although the average investment in ASB increased in 2014, distribution remains skewed. o In 2012, the bottom 73.7% had an

average savings of RM611 in their accounts.

o By 2014, the average savings for the bottom 71.5% had fallen to RM536.

o Meanwhile, the average savings for the top 0.2% of unit-holders grew by RM52,591 to RM745,038.

o Since the maximum that ASB unit-holders can invest is RM200,000, the high account balances of the wealthy are from many years of accrued dividends.

Average savingsBottom 13.5% RM 5,621

Next 6.5% 9,585

Top 1.6% 1,600,000

Table 6: Savings of EPF members in 51 – 55 age group, 2014

25

Kha

zana

h R

esea

rch

Inst

itute

< R

M 2

k

2k –

< 3

k

3k –

< 4

k

4k –

< 5

k

5k –

<6k

6k –

< 7

k

7k –

< 8

k

8k –

<9k

9k –

< 1

0k

10k

– <

15k

15k

and

abov

e0%

20%

40%

60%

80%

100%

Housing & utilities

HealthEducation

Alcoholic beverages & tobaccoRecreation & culture

Clothing & footwear

Miscellaneous goods &services

Furniture & household maintenance

Food & non-alcoholicbeverages

Transport

Restaurant & hotels

Communication

Biggest expenditure items are housing and utilities,

transportation, and food


Chart 32: Average household spending, real and nominal terms (RM)

1993/94 1998/99 2004/05 2009/10 20140

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Real

Nominal

RM

Chart 34: Percentage monthly spend on goods and services, by income category, 2014

The richest households only allocate 9.9% of their monthly expenditure or RM992 per month on food at home (RM992 per month). In contrast, the poorest households who earn less than RM2,000 spend RM403 ie 30.4% of their monthly expenditure.

26

Kha

zana

h R

esea

rch

Inst

itute

Modern conveniences+State of Households

Chart 37: Ownership of electrical appliances, by states, 2012 and 2014 (percentage)

Putrajaya

K. Lumpur

Selangor

Melaka

Johor

Labuan

P. Pinang

N. Sembilan

Pahang

MALAYSIA

Kedah

Perak

Terengganu

Perlis

Kelantan

Sabah

Sarawak

0% 25% 50% 75% 100%

Air-conditioner20142012

• 83.9% of households own a car in 2014 (77.8% in 2012).• Almost all households own refrigerators, washing machines, televisions and mobile phones.

Marque Quantity

Mercedes 10,859

BMW 7,515

Volkswagen 6,405

Lexus 2,101

Audi 1,592

Mini 756

Volvo 619

Porsche 567

Land Rover 525

Total 30,939

Table 8: Number of luxury cars sold by official distributors, 2015

27

Kha

zana

h R

esea

rch

Inst

itute

Can Malaysians afford nutritious food?


Table 9: Minimum daily expenditure for a food basket to meet the MDG

Chart 39: Minimum monthly expenditure for a food basket that meets the MDG, 2014

CityDerived daily

expenditure per household

Derived daily expenditure per

personKota Bharu RM 25.21 5.04Alor Setar 26.17 5.23Johor Bahru 27.76 5.55Kuala Lumpur 28.43 5.69Kuala Terengganu 29.38 5.88

Kota Kinabalu 33.06 6.61Kuching 38.45 7.69

Table 17: Monthly food basket per household

Food itemMonthly quantity

per householdDaily quantityper household

Rice 25.0 kg 800 gBread 300 slices 10 slicesChicken 9.5 kg 312.5 g (a quarter of a chicken)Eggs 150 5 eggsFish 16.2 kg 540 g (around 5 kembung)Legumes 30 kg 1 kg (e.g. dhal)Milk 2.3 kg 77 g powdered milkFruit 47.7 kg 1.6 kg (e.g. papaya)Vegetables 35.1 kg 1.2 kg (e.g. kangkung)Cooking oil 5.0 kg 160 gOnions 6.0 kg Around 2 onions

28

Kha

zana

h R

esea

rch

Inst

itute

Food is getting more expensive+State of Households

Chart 40: Index of monthly consumer price indices, 2010 – 2015

4017

9 ...

4029

9 ...

4042

2 ...

4054

4 ...

4066

4 ...

4078

7 ...

4090

9 ...

4103

0 ...

4115

3 ...

4127

5 ...

4139

5 ...

4151

8 ...

4164

0 ...

4176

0 ...

4188

3 ...

4200

5 ...

4212

5 ...

4224

8 ...

95

100

105

110

115

120

125

CPI

Non-Food

Food

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

95

100

105

110

115

120

125

Food andNon-AlcoholicBeverages

Food at Home

Food Awayfrom Home

Non-AlcoholicBeverages

Chart 42: Index of monthly price indices for F&B, Food at Home, Food Away from Home, and Non-Alcoholic Beverages, 2010 – 2015

2010 = 100 2010 = 100

29

Kha

zana

h R

esea

rch

Inst

itute

Food is getting more expensive+State of Households

Chart 43: Components of the Food at Home Index, 2015 (percentage)

30

Kha

zana

h R

esea

rch

Inst

itute

Some prices are seasonal+State of Households

Chart 46: Index of monthly prices for mustard green, red chili, chicken egg, and tomato, 2010 – 2015

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-1

1Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15 50

70

90

110

130

150

170

190

Chicken egg - Grade A (Telur ayam)

Red Chilli - Local(Cili merah tempatan)

Tomato - Highland(Tomato tanah tinggi)

Mustard green(Sawi hijau cerah)

v v vv v v v v vv

Chinese New YearHari Raya Aidilfitri

2010 2011 2012 2013 2014 2015

Jan-10 = 100

31

Kha

zana

h R

esea

rch

Inst

itute

Cereals are the largest component of food imports


Chart 48: Food imports, by commodity, 2005 – 2015

Chart 49: Percentage of food imports, by commodity, 2005 – 2015 (by value)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

1

2

3

4

5

6

7

8

9

MeatFish & seafoodDairy & eggs

Vegetables & fruits

Cereals

RM b

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Shar

e of

Tot

al Im

port

s

Cereals

Coffee, tea, cocoa & spices

Vegetables & fruits

Misc. edible products

Animal feed meal

Dairy & eggs

Sugar

Fish & seafood

Meat

Live animals

32

Kha

zana

h R

esea

rch

Inst

itute

Malaysia depends on only a handful of countries for its food imports


Chart 50: Sources of food imports, 2014

33

Kha

zana

h R

esea

rch

Inst

itute

Milk price anomaly+State of Households

Note: The indices used include similar (comparable) items in the basket of commodities.

Chart 62: Monthly dairy price indices for Malaysia and the world, 2010 – 2015

Chart 63: Monthly dairy price indices for Malaysia, Australia, and New Zealand, 2010 – 2015

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

60

70

80

90

100

110

120

130

140

FAO Dairy Price Index

Milk Powder & Other Dairy Products Index

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

70

80

90

100

110

120

130

AU export price index - Dairy products & eggs

NZ export price index - Dairy products

MY milk powder & other dairy products index

2010 = 100 2010 = 100

34

Kha

zana

h R

esea

rch

Inst

itute

Household debt remains high & Household savings are low. Time for a Consumer Credit Act?


Chart 65: Profiles of borrowings, by purpose of financing, 2014 and 2015

2014 20150%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

45.7 48.6

16.615.5

15.7 15

7.7 7.6

6.5 6.13.9 3.53.9 3.7

Per

cent

age

of H

ouse

hold

Deb

t

Others

Personal Financing

Non-Residential

Securities

Credit Cards

Residential

Hire purchase

o Households earning less than RM3,000 per month have a leverage ratio of 7x their annual income on average. Higher income households have an average leverage ratio of around 3x.

o The bulk of national savings is by public and private institutions.

o Household savings at 1.4% of adjusted disposable income are low compared to Chile and Korea, but still higher than Japan

35

Kha

zana

h R

esea

rch

Inst

itute

The Malaysian Workforce

36

Kha

zana

h R

esea

rch

Inst

itute

Malaysia’s wages as a share of GDP is low

+The Malaysian Workforce

Chart 69: Employees compensation as a percentage of GDP

RuralUrban

Sabah KelantanSarawak

KedahTerengganu

PerlisPahang

Perak MALAYSIA

MelakaP. Pinang

N. SembilanLabuan

JohorSelangor K. LumpurPutrajaya

0 500 1,000 1,500 2,000 2,500 3,000

20152012

Median Monthly Salaries and Wages

20152012

RM

Chart 19: Change of median monthly wages between 2012 and 2015

In the last 5 years, wages have grown faster than productivity. But over the past 50 years, wages have grown slower than productivity.

US

France

Japan

China

UK

Norway

Korea

Singapore

Chile

MALAYSIA (2015)

MALAYSIA (2014)

MALAYSIA (2013)

Thailand

Mexico

0 10 20 30 40 50 60

53.4

52.8

51.6

50.7

49.4

47.8

44.5

42.7

39.2

34.8

34.3

33.9

32.2

27.2

%

37

Kha

zana

h R

esea

rch

Inst

itute

Malaysian workers have become more educated


Chart 74: Labour force, by educational attainment, 1982 - 2015

Source: DOS (2016c), DOS (2015g), and DOS (n.d.b)

Table 13: Median monthly wages and wage premium, by education levels, 2015

Source: DOS (2016d)

For those with tertiary education, 44.0% have a degree and 36.0% a diploma.

1982

1983

1984

1985

1986

1987

1988

1989

1990

1992

1993

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cent

age

of th

e La

bour

For

ce

Tertiary %

Secondary %

No formal education %

Primary %

Education level

Median monthly

salaries and wages (2015)

Wage premium,

compared to previous level of attainment

Wage premium, compared

to 'SPM and below'

No Certificate 1,000

SPM and below 1,400 40.0%

STPM/Certificate 2,000 42.9 42.9%

Diploma 2,800 40.0 100.0

Degree 4,350 55.4 210.7

RM

38

Kha

zana

h R

esea

rch

Inst

itute

Youth unemployment is higher than overall unemployment


Chart 77: Unemployment, by educational attainment, 1982 – 2015

Chart 21: Overall unemployment rate vs unemployment rate for 25 to 29 year olds, 1995 – 2015

Rising unemployment especially among the 20 – 29 age group cohort could signal structural rather than cyclical challenges.

1982

1983

1984

1985

1986

1987

1988

1989

1990

1992

1993

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cent

age

of th

e U

nem

ploy

ed

Tertiary %

Secondary %

No formal education %

Primary %

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Une

mpl

oym

ent R

ate

25 –29

Overall

39

Kha

zana

h R

esea

rch

Inst

itute

Women’s labour force participation


Chart 84: Women’s labour force participation rate by age in (a) Japan and (b) Korea, selected years

15 –

19

20 –

24

25 –

29

30 –

34

35 –

39

40 –

44

45 –

49

50 –

54

55 –

59

60 –

64

0%10%20%30%40%50%60%70%80%90%

100%Men

Labo

ur F

orce

Par

ticip

atio

n R

ate

201420041995

15 –

19

20 –

24

25 –

29

30 –

34

35 –

39

40 –

44

45 –

49

50 –

54

55 –

59

60 –

64

0%10%20%30%40%50%60%70%80%90%

100%Women

199520042014

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

≥65

0%10%20%30%40%50%60%70%80%

Japan

1995 2000 2005 2010 2015

Labo

ur F

orce

Par

ticip

atio

n R

ate

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

≥65

0%10%20%30%40%50%60%70%80%

Korea

1995 2000 2005 2010 2014

Chart 83: Labour force participation rate, by age for men and women, 1995, 2004, and 2014

40

Kha

zana

h R

esea

rch

Inst

itute

The more educated, the more likely a woman is to be in the workforce


Chart 82: Women’s labour force participation rate in ASEAN, 2014 (percentage)

Chart 86: Labour force participation rates, by education level and age for women, 2015

The Philippines

Indonesia

MALAYSIA

Brunei

Singapore

Thailand

Vietnam

Myanmar

Laos

Cambodia

0 10 20 30 40 50 60 70 80 90

51.1

51.8

53.6

58.3

58.6

62.0

73.2

75.1

76.3

77.4

%

15 –

19

20 –

24

25 –

29

30 –

34

35 –

39

40 –

44

45 –

49

50 –

54

55 –

59

60 –

64

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Women

Labo

ur F

orce

Par

ticip

atio

n R

ate

TertiarySecondaryPrimary

No formal education

41

Kha

zana

h R

esea

rch

Inst

itute

Population Ageing

42

Kha

zana

h R

esea

rch

Inst

itute

Malaysians are living longer+Population Ageing

Chart 88: Life expectancy at birth, by sex, 1970 – 2015 Table 15: Life expectancies at selected ages,

by gender, 2015

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

60

62

64

66

68

70

72

74

76

78

80

Male

Female

years

o Can Malaysians afford to live longer? o Even if we take the average EPF savings of those in the 51 – 55 age groups

at face value (disregarding the tail-end distortion), after adjusting for inflation and interest rates we estimate that RM 159,952 would only last an individual 15.6 years assuming they live on the current poverty line for urban Peninsular Malaysia.

43

Kha

zana

h R

esea

rch

Inst

itute

Malaysians are having fewer children

+Population Ageing

Chart 89: Total fertility rate, 1960 – 2015

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

1

2

3

4

5

6

7

Tota

l Fer

tility

Rat

e P

er W

oman

44

Kha

zana

h R

esea

rch

Inst

itute

Malaysia’s population structure is bulging upwards

+Population Ageing

Chart 92: Malaysia’s population structure in 2015

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

FemalesMales

0m0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Population Size

0m



0 - 4

5 - 9

10 - 14

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

70 - 74

75 - 79

80 - 84

85+ years

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Age

Gro

up

0m

45

Kha

zana

h R

esea

rch

Inst

itute

The end of the demographic dividend?

+Population Ageing

Chart 90: The percentage of the Malaysian population aged 60 years old and above compared to the population younger than five years old, 2010 – 2040

2010 2015 2020 2025 2030 2035 20400%

2%

4%

6%

8%

10%

12%

14%

16%

18%

60 years and above

Younger than 5 years

Sha

re o

f the

Tot

al P

opul

atio

n

o An ageing society exerts increased financial pressure on the healthcare system via medical treatments which require life-long treatment on top of having high cost of care.

46

Kha

zana

h R

esea

rch

Inst

itute

Policy ResponsesRedefining old age

o Malaysia’s retirement age is 60; Japan’s 65; Greece and Norway’s 67Ensuring financial sustainability of old age

o Develop annuities, issued either by the public or private sector, which guarantee inflation-adjusted income throughout a person’s life. Like insurance, longevity risk will then be spread over many people.

o Develop reverse mortgages or similar products, so that people can draw against the equity in their property. o Unfortunately, these options would only work if people have enough savings to begin with, so that they could buy the

annuity or property. Thus, ultimately, there is still a need to increase incomes .Social Protection

o In Singapore, there is the Silver Support Scheme which aims to supplement the incomes of the low-income elderly, targeting Singaporeans in the bottom 20% aged 65 and above.

Reorienting the health system towards strengthening preventative health measureso Reorient the healthcare system towards a more public health approach with greater focus on implementing

preventative health measures, as opposed to a hospital-centric approach which is focused on curative care.

Other policy considerations: Balancing between the needs of the elderly and the needs of the youtho Some of the policy responses to address the needs of the growing elderly population may come at the expense of the

younger populations. For example, while increasing the retirement age may allow an older individual to earn an income for longer, it may result in one fewer potential job for a younger person, thus exacerbating existing youth unemployment.

o Similarly, some may raise the question of “fairness” in terms of diverting government funding to meet the needs of specific age groups away from others. Should the government prioritise the needs of one age group over another, and if so, how?

47

Kha

zana

h R

esea

rch

Inst

itute

Conclusion

48

Kha

zana

h R

esea

rch

Inst

itute

ConclusionHouseholds are better off

o Compared to 2012, households in 2014 have a higher median (RM4,585) and average income (RM6,141).

o The growth in the incomes of the lowest 40% of households (the B40) has been the fastest.

o Cash transfers (like BR1M) have improved incomes, particularly among the less well-off. o The gap between rural and urban households and households of different ethnic groups is

closing and the Gini coefficient (a common measure of inequality) has improved to 0.401. o Access to basic infrastructure (eg schools and public health facilities) continues to

improve and we are a more wired nation as more people and households have internet access.

o Poverty has declined and hardcore poverty is minimal although the poverty rate for Orang Asli in the Peninsula and the Bumiputeras in Sabah and Sarawak are still a concern.

o Unemployment, which has increased slightly, is still low at 3.1% in 2015.

More women have entered the workforceo The participation rate of women in the workforce is now (2015) 54.1% and peaks at

87.7% for young women with a tertiary education.

We live longero Life expectancy at birth is 77.4 years for women and 72.5 years for men. Men who are 60

years old can expect to live to 78.4, and women, 80.9 years. It is a far cry from 1970 when the life expectancy at birth for men was 61.6 years.

49

Kha

zana

h R

esea

rch

Inst

itute

ConclusionBut some disparities remain

o 84.8% of Kelantan and 81.1% of Perak households earn less than RM6,000 a month, whereas 64.4% of Kuala Lumpur and 69.2% of Putrajaya households earn more.

o Disparities in wealth (measured by EPF and ASB savings) are more pronounced than that of income (reflecting the fact that those with higher incomes can save more).

o There is a concern that many will not have saved enough for a 20-year retirement and are taking on too much debt.

o Do we need a consumer credit act?Low wages and youth unemployment are of concern

o The median salary is only RM1,600 per month, although those who live in an urban area or are educated earn more.

o Youth unemployment, while still low, is, at 3.4% in 2014, higher than overall unemployment, and a large proportion (33.8%) of the unemployed have a tertiary education.

Food prices have risen faster than overall inflationo In selected urban areas, the cost of feeding a family of five with a diet that meets the Ministry of

Health’s recommendations is high compared to the poverty line. o We have also seen price anomalies in imported and locally produced foodstuffs like vegetables, milk,

and chicken that deserve further investigation.Birth rates are falling:

o Coupled with our longer life expectancy this means that we are becoming an ageing population. As a society we will have to learn to balance and prioritise public spending between the needs of the young and the needs of the old.

o Should we consider raising the retirement age, Providing annuities, Social Protection, and strengthen preventive health measures?

the state of households ii

Government & Nonprofit