Housing, education, elderly care highest concerns for B40 group

In the case of the urban poor, the B40 group faces expenses related to children’s education and elderly care, says economist


THE bottom 40% (B40) income group in the country is saddled with housing, education and elderly care costs in their expenses.

Institute for Democracy and Economic Affairs (IDEAS) senior fellow Dr Carmelo Ferlito said in the case of the urban poor, the group faces expenses related to children’s education and elderly care, which are services that are taken on by the community or the extended family network in the rural settings.

“I would extend the concept by saying the urban life entails a higher cost of living, not only in terms of prices of products, but also in the sense that, moving away from kampung, people have less access to a “natural” social support system — the community — which helps cope with the lack of services.

“The community, or the extended family, can help in providing childcare or elderly care services, for example,” Ferlito told The Malaysian Reserve (TMR) in a recent interview.

He added that the basic expenses of the B40 group include shelter, clothes and food, while transportation plus communication expenses are growing.

“Transportation and communication expenses have a growing impact. In the higher portion of the B40, surely we can observe an increasing role played by travel and entertainment,” he said.

Subsequently, Ferlito added that his experience in Malaysia reveals that there are always options for all kinds of pockets, but lifestyle and trends-related habits may affect budgets for the younger generations more.

“Think about spending RM10 for a cup of coffee in Starbucks, or the new fashion of bubble tea,” he said.

He added that an increasing part of the budget is also swallowed by technologies, communications, travel, holidays and entertainment.

“In technical term, we economists would say that the younger generations in Malaysia have a higher temporal preference, which means they are more present-oriented, when compared to the older generations, and therefore they spend accordingly,” he said.

Meanwhile, Ferlito said there are difficulties in determining the reasons why the “urban poor” are poor, and that the B40 group should not be generalised due to its size.

“I believe it should be more appropriate to talk about B10 or at maximum, B20 to discuss real poverty — the one that needs to be addressed from the social and political action’s perspective,” he told TMR.

He said the reason why is because in the wide B40 group, one can find people who struggle due to low income and some who straddle because consumption habits play a fundamental role.

“In most cases, it is a combination of both and the role of consumption habits increases the more we move upward within the group,” he said.

The incomes by household groups are divided by their median income, and the latest numbers in 2016 denote that the B40 group has a median income of RM3,000, M40 (middle 40%) at RM6,275 and T20 (top 20%) at RM13,148.

He added that it is almost impossible to make a generalisation of how the income group’s salary matches against the cost of living.

“We have to distinguish between reality and perception. A higher perceived cost of living can be the result of changed consumption habits; that is considering holidays as a necessity rather than a luxury good.

“If we observe the average wage growth, in the past years, it has been higher than the inflation rate,” he said.

Due to the differences in perception, IDEAS is currently conducting a study which will attempt to analyse the living costs for different micro-categories of people.

It is aimed to move beyond average data and analyse into the micro-realities.

“I think it is now too early to draw non-emotional and too general conclusions.

“We want to conduct an analysis that keeps into account different peoples and consumption habits,” he said.

To further support this, Ferlito wrote a report titled “Malaysian Property Market: Affordability and the National Housing Policy”, part of IDEAS’ policy ideas series.

The report stated that the affordability issue is a complex one, and looking at it simply by looking at the ratio between median house price and median income is simplistic and misleading.

Khazanah Research Institute had also written an article titled “The Absolute versus Relative Poverty Conundrum”, stating that Malaysians feel that their incomes are barely enough to make ends meet, while the country has almost no poverty according to official count.

“New ways of capturing poverty are needed and some have even argued that we should ask Malaysians themselves what the poverty line should be,” it stated.