However, total wealth in the country grows 14% YoY to US$682b

by MARK RAO/ pic by TMR FILE

ONLY 0.2% of adult Malaysians were categorised in the over US$1 million (RM4.18 million) wealth bracket despite total wealth in Malaysia growing 14% year-on-year (YoY) to US$682 billion, according to Credit Suisse Group AG’s latest global wealth report.

The 2019 report found that 0.2% or 43,646 adults living in Malaysia were placed in the over US$1 million wealth band, while the majo-rity of the adult population (96.1% or 20.97 million people) were categorised as having wealth at or below US$100,000.

This comprised 42.7% of adult Malaysians with wealth between US$10,000 and US$100,000, and 53.4% with wealth under US$10,000.

The remainder 3.7% was placed in the US$100,000 to US$1 million wealth band. The Swiss bank noted that its quality of data is not robust.

The report noted that there were a total of 21.82 million adults living in Malaysia in 2019, with mean wealth per adult at US$31,270 and median wealth per adult at US$8,940.

Total wealth in Malaysia also grew to US$682 billion, representing a 14% increase from the US$598 billion last year, comprising 0.2% of the world’s total wealth.

Malaysia’s wealth distribution numbers were largely in line with the findings from 2018 which also saw 0.2% of the adult population in Malaysia that year falling in the over US$1 million wealth bracket.

Despite the vast majority of Malaysians excluded from the top wealth brackets, the country’s Gini coefficient reading — which measures the distribution of income in a given population — improved from 82% in 2018 to 79.6% this year.

Note that a higher Gini index reading indicates greater income inequality, while lower reading indicates better income equality in a society.

The country’s Gini coefficient is also lower than the world average of 88.5% and Asia Pacific’s 88% in 2019.

Nonetheless, the income disparity issue in Malaysia is becoming more relevant today amid the rising cost of living and stagnating wage growth.

The federal government announced a slew of initiatives to redress some of these concerns, especially targeted to alleviate the financial burden faced by the bottom 40%, or B40, income earners.

These include, but is not limited to, tax incentives, petrol subsidies, increasing the number of Bantuan Sara Hidup recipients and measures to improve home affordability and ownership.

The government also intends to raise the income tax in excess of RM2 million to 30% from the 28% currently, estimated to impact some 2,000 top income earners in the country and generate an additional RM100 million in annual tax revenue.

Malaysia will also raise the minimum wage to RM1,200 starting next year, but this will be limited to employees in major cities across the country.

The effectiveness of these initiatives remains to be seen, as income disparity is often a structural issue that requires more than just one-off initiatives and cash handouts to properly address the issue.

For instance, Malaysia’s reliance on low-skilled labour is among the issues suppressing wage growth in the country.

How Malaysia transitions into a high-skilled future, which is the intention of the country’s Shared Prosperity Vision 2030, will be key in reducing the income gap.