Mind the gap

It is hoped that the 2019 Budget, to be tabled on Friday, will focus on reducing income disparity, which remains high relative to East Asian countries

Malaysians are very concerned about the growing income disparity and are hoping that the 2019 Budget, Pakatan Harapan’s first ever, will help mind it. It was perhaps inevitable in the early years of Malaysia’s economic progress when the fruits of industrial development went directly to a small number of business owners. Now that we are 61 years ahead in national development, economic growth must come with equity. Understandably, many Malaysian economists view this economic path to be the most appropriate given the country’s development history and social context. Malaysian Institute of Economic Research (MIER) executive director Professor Dr Zakariah Abdul Rashid is one with such a view. He told the New Straits Times yesterday that socio-economic development in the context of Malaysia was all about growth with equity. The government is not without any option. A key path the PH government can take to bridge the income gap is to provide opportunities for education and skills development for the low-income (B40) and middle-income (M40) group. Education and skills development are great social mobilisers. And great equalisers, too. This is true not only for developed countries in the West, but also for developing countries in the East. What is good for Sweden, it appears, is good for Malaysia. Well, at least in the socio-economic context.

According to Khazanah Research Institute’s (KRI) The State of Households 2018: Different Realities, paid employment and selfemployment were the two most important sources of income for the 6.9 million Malaysian households in 2016, the latest statistics available. Economists have long established a positive correlation between earning potential of individuals and education or skill level. KRI’s 2018 report supports this. According to the report, household heads who had at least a university degree had household incomes 3.6 times more compared with those with no certificate. Sadly for Malaysia, available data show much room for improvement in this area. A World Economic Forum website, dated Feb 3, 2015, quoting the World Bank, showed only 25 per cent of Malaysia’s labour force had a degree or similar qualification. The remaining 75 per cent of degree holders were from M40 and T20 groups. For purposes of comparison, 43 per cent of South Korea’s labour force had a degree or equivalent qualification.

Similarly, efforts must also be expended to create more entrepreneurs from the B40 and M40 groups to ensure that the top 20 (T20) are not the only ones who have access to wealth. Business is a great equaliser as well. With the right guidance and skills training, the B40 and M40 groups may be able to grow their business into small and medium-scale enterprises (SMEs). It is hoped the SME Masterplan 2012-2020 will provide opportunities to B40 and M40 to be part of the SMEs, which form the backbone of the country’s economy. This will be very much in line with SME Corporation’s vision: to enhance wealth creation and social wellbeing of the nation. Minding the income gap is certainly one way to achieve the vision.

Education and skills development are great social mobilisers.