High quality human capital can narrow income inequality — Report

KUALA LUMPUR: Malaysia will be able to narrow the income gap between the top 20 per cent ( T20) and the middle 40 ( M40) and bottom 40 ( B40) income groups by increasing its investment to produce high- quality human capital.

According to Allen Ng, lead author of ‘The State of Households 2018: Different Realities’ report, human capital could serve as the most important equaliser in addressing income equality in the country.

“If we don’t leverage and improve our human capital by investing in education and healthcare, we could actually worsen our (income) inequality. We will not be able to solve the problem,” he told a press conference after the launch of the report by Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan yesterday.

Ng said the gap between the T20 and M40/ B40 groups almost doubled in 2016 compared with two decades ago.

Despite recording a slower growth pace since 2010, the income equality between the T20 and B40/ M40 groups is likely to continue, given its higher base, he said.

He said a T20 household in Kelantan, Perlis or Pahang might have an income equivalent to a B40 household in Kuala Lumpur.

On spending, Ng said households with incomes below RM2,000 per month would spend nearly 95 per cent of it on everyday expenditure, leaving them with very little savings and thus vulnerable to economic shocks or emergencies.

Those with incomes below RM5,000 have cut back on their consumption, while people earning above RM5,000 spent more on recreational activities, cultural services and food consumed out of their homes.

The ‘State of Household 2018: Different Realities Report’ is the third instalment of Khazanah Research Institute’s State of Household collection, providing perspectives on the changing trends of inequality, sharing its findings on the Malaysian labour workforce and measures required to improve the country’s economy. — Bernama