The new income grouping in Malaysia


Related self-comforting post here.

This graph is adapted from IHS - they serve 80% of the Fortune 500 companies.

This is the first time I see such an "honest" graph. Nearly 70% Malaysia household income falls under low-income class. Our society is not B40 or M40 - it should be B70-M20-T10. If you have the time and privileged to read this, you are probably somewhere between the higher B70 and M20 bracket.

In order to qualify in the middle-income group, you need a household disposable income of at least USD20k  - that's about RM88,000 yearly or RM7,330 a month. So you need to earn above RM7,000 net to be at the lowest end of mid-income class. Looking at our average income report, most families will need dual income to be in mid-class.

Is RM7,330 too high?
This is indeed a far cry from the recorded national average wage, but the figure is as real and honest as it could be. Think about it, this is how much it cost to live in the middle-class by the global standard. To be middle class, you should find fresh crunchy apples affordable. And apples are relatively expensive here.

For a family of 4 living in Klang Valley:
400k House - RM2,000
Two below 100k cars on 9 years loan - RM1,500
Petrol Maintenance Etc - RM700
Food at RM700 per person - RM2,800
Total : RM 7,000 before other spending or insurance

Most people with credit cards would think that they are in middle-class (I thought so myself too) but they start to accumulate consumer debt. If anyone is struggling to live a middle-class life with a lower income, it is just because our income is not enough to sustain a middle-class life.

What it actually means if you fall below M20?
No Apple products, stop eating at TGIF, Zara and Topshop is not where you should spend.

Is our wage low?
I believe that wage is relative to our value contribution to the economy. We have to be valuable for the market to invest in us. Our nominal GDP is only about USD10,500 per capita. For a household of two, the GDP contribution is only USD21,000 per capita. Singapore GDP per capita stands at USD55,000, Australia at USD67,000. Calling for higher wages without adding value will only devalue our currency. It is not a number game, we have to be innovative and creating value to "demand" for a higher pay.

Best for society?
I was asked if it was a good thing to have growing middle income group. (who ask such question -.-) The person probably comes from elite family. It really depends if you think it is better to live in Sweden or India. A society with a system that enable everyone's success is a healthy happy society. And a happy society is better living for all. If you are at the top 10, you likely won't like the society to have more middle income group because you loose grip on controlling others financially (like master and slave but in financial terms) Imagine where the nation would be if we have a large middle income group that are incorruptible. Are we growing our middle income group? Seems like it, even at a slow pace.

Conclusion
This is just a part of how economist measure economy, it is not conclusive. Sometimes these figures don't add up when I try to study them. For example, our consumerism figure seems higher than our income average. How do people afford it? Where do the money come from?

My personal view is either the money comes from debt or potential wealth that goes into inefficiency and malpractice.

What do you think?

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