Is average household income a flawed measure of Malaysian wellbeing?

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Average Household Income is a Flawed Measure of Malaysian Wellbeing

Experts argue that the national average household income is an inadequate metric for assessing the true wellbeing of Malaysian families. This figure is significantly influenced by high earners, thereby presenting a skewed and often misleading picture for the majority of the population. Instead, they suggest focusing on more inclusive objectives that better reflect the economic realities faced by lower-income groups.
Median Income Offers a More Realistic View

The average, or mean, household income can be artificially inflated by the earnings of the top 20 per cent of income earners. This effect means that a rise in the income of high earners alone can push up the national average without substantially improving the financial standing of most families. For instance, in 2019, the average household income stood at RM7,901, while the median income was considerably lower at RM5,873, highlighting a significant disparity.
Minimum Wage and Poverty Line Concerns

Experts propose that increasing the minimum wage and ensuring it surpasses the Poverty Line Income (PLI) would be a more effective strategy for improving the lives of low-wage earners. Many government employees, for example, earn less than RM2,000 per month, which falls below the current household PLI of RM2,208. As of February of the previous year, the minimum wage in 56 major towns and cities was RM1,200, a figure many believe is insufficient.
Doubts Surrounding the RM10,000 Income Target

The 12th Malaysia Plan's objective to raise the average household income to RM10,000 per month by 2025 has been met with skepticism. Achieving this target would necessitate an annual growth rate of approximately 8.2 per cent, a figure higher than the average annual growth of around 7 per cent observed between 2009 and 2019. Given the current economic climate, this aspiration is considered optimistic and potentially unrealistic by some analysts.
Lack of Specificity in Economic and Social Plans

Beyond the debate on income targets, the 12th Malaysia Plan has been criticized for its lack of detailed plans and milestones for economic growth and social protection. While the plan acknowledges the need to revamp social protection systems, it does not clearly outline the development of a comprehensive cradle-to-grave system. This omission is particularly concerning given the increased vulnerabilities exposed by the recent pandemic, which have significantly impacted household welfare.

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Is average household income a flawed measure of Malaysian wellbeing?

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