Policy makers need to account for income disparities among different states

KUALA LUMPUR: Policy makers should take into account the household income disparities among different states in Malaysia when formulating policies to achieve their targeted objectives, Khazanah Research Institute (KRI) argues.

The institute’s research director Suraya Ismail said if policy makers did not root their policies in the context of the different realities faced by households in different states in the country, then they would likely miss their policy target.

“In order to come out with prop- er, targeted policies, we need to understand the realities at state and federal levels,” Suraya said.

“If we can get that right and understand the truth in different places, then we can actually do proper policymaking that is targeted and useful,” she told a dialogue session at the launch of The State of Households 2018: Different Realities report here yesterday.

According to the KRI’s report, there is a significant geographic diversity in household incomes across Malaysia. Nationally, the Middle-40% (M40) households refer to those with a monthly income of between RM4,360 and RM9,619. However, if we consider the income distribution at state level, the equivalent state-level thresholds vary significantly, the report said.

For instance, a Top-20% (T20) household in Kelantan, Perlis or Pahang may have an income equivalent to a B40 household in Kuala Lumpur. However, this does not take into account the fact that the cost of living in the states may also be very different.

Nevertheless, the report said, the key point is that different states have different household income thresholds. “A one-size-fit-all threshold applied uniformly across Malaysia for public policy such as social welfare, affordable housing, education policy and others will be a gross over-generalisation of the diverse set of household income thresholds in the different states in Malaysia,” it said.

“Within the different states of Malaysia, the biggest difference in income is associated with urbanisa- tion, while across Malaysia, the biggest difference is associated with education levels,” it added.

Despite the different realities faced by different states, Suraya said Malaysian policy making tends to suppress the local context in favour of a contextless approach, such as by using international standards that are considered “best practices” as the benchmark.

“We need to stop thinking that the international benchmark is the best; we need to understand our baseline,” she added.