Economists call for poverty line to be revised more often

Food aid being distributed to poor people. Policy-makers use the poverty line to determine how to distribute welfare aid.

PETALING JAYA: Economists have called for more periodic revisions of the poverty threshold in the wake of the government’s announcement on Friday that the poverty line has been raised from a monthly household income of RM980 to RM2,208.

Christopher Choong Weng Wai

Christopher Choong Weng Wai, deputy research director of Khazanah Research Institute, said revisions of the poverty line income were important because society’s idea of the minimum standard of living would constantly change.

“Think about mobile phones or internet connections… Is this a ‘minimum’ that we need these days to be able to function in society? This may not have been the case 15 or 20 years ago.

Friday’s change was the first in 15 years. “It took us even longer, about 28 years, to change from the 1977 methodology to the 2004/05 methodology,” Choong said.

The poverty threshold is based on the basic requirements for a household to live healthily and actively. It is seen as a tool to guide policy makers, and an unduly low figure could result in poor households being unable to qualify for government support.

However, Choong said policy-makers should not be fixated with one poverty measure as the single source of truth. A range of poverty measures were needed to get a closer approximation of the different deficiencies that people face.

Mohd Uzir Mahidin

Malaysia’s chief statistician, Mohd Uzir Mahidin, said the update was in line with evolving household needs, and emphasised optimal food intake and quality non-food basic requirements.

In a household income report released last week, the Statistics Department said the absolute poverty rate had improved from 7.6% in 2016 to 5.6% in 2019. Hardcore poverty fell from 0.6% in 2016 to 0.4% in 2019.

Philip Alston

However, the figure of 0.4% has not gone down well with everyone. Last year, the United Nations Special Rapporteur on poverty, Philip Alston, sarcastically said the 0.4% rate – or 25,000 households – would make Malaysia the “world champion for conquering poverty”.

Alston said such a rate would be a result of an outdated and unduly low poverty line which did not reflect the true cost of living and excluded vulnerable populations.

Rajah Rasiah, an economics professor at the Asia-Europe Institute of Universiti Malaya, said revisions are needed to allow for better development planning to alleviate absolute poverty.

Rajah Rasiah

“The poverty line income we used from the 1970s has always been contentious,” Rasiah told FMT. “Periodic revisions are important to adjust poverty line incomes with changing figures on GDP per capita and general price levels.

The poverty line is used to identify the poor so that welfare instruments can be targeted effectively to support those below the line, which includes offering them subsidies such as BR1M (Bantuan Rakyat 1 Malaysia) offered by the Barisan Nasional government,” added Rasiah.

An unduly low poverty line could see poor households unable to qualify for government support.

Rasiah said that he would have preferred the poverty line income to be around RM3,000 based on his own estimations.

Goh Lim Thye

Goh Lim Thye, a senior economics lecturer at Universiti Malaya, said the “inaccurately low” poverty lines has led to government poverty reduction policies which may have excluded the most vulnerable groups.

He also said that despite the lack of accurate data preventing more periodical revisions of the poverty line income, Malaysia “has never failed” to come out with affirmative action policies to help the poor such as the New Economic Policy and its successor, the National Development Policy.

However, subsidies and welfare should not be long term solutions, he said, calling for policies to focus on human capital development and improve the productivity of the working population.

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