Address Poverty Holistically
Among the new priorities and emphases for 2018-2020 outlined in the recent mid-term review of the Eleventh Malaysian Plan (RMK-11) is “enhancing inclusive development and wellbeing”. Such a priority is in line with the 2030 Agenda for Sustainable Development Goals (SDGs), which include the goals towards zero poverty, good health and wellbeing, gender equality and sustainable cities and communities.
The inclusive development approach in RMK-11 will be implemented with emphasis on growth with equity, mainly for the overall wellbeing of all Malaysians, irrespective of gender, ethnicity, socioeconomic status and geographical location.
The key strategy lies in income growth, especially among the bottom 40% income group (B40), as well as vulnerable groups such as children, youth, women, the elderly and persons with disabilities.
The income measures will be geared towards self-reliant, innovative and industrious society, whereas the wellbeing measures will be reflected in higher purchasing power, quality and affordable housing, better healthcare system, active lifestyle, safer and secure nation, and noble society.
At present, there are 24,700 poor households, defined as those who earn less than RM980 per month. This figure currently represents 0.4% of total households nationwide. For the overall B40 category, there are 2.78 million households who earn less than RM4,360 monthly.
An interesting development in the mid-term review of RMK-11 is the effort to improve the measurement of national poverty. In this respect, the Multidimensional Poverty Index (MPI) will be adopted to complement the existing Poverty Line Income (PLI).
Multidimensional Poverty Index (MPI) is considered to be an inclusive measurement of poverty as it will take into account other non-income dimensions with regard to poverty, such as education, health and standard of living.
Poverty has undergone its own evolutionary process, in tandem with social and economic developments. In Malaysia, Royal Professor Ungku Aziz has once introduced Sarong Index as a measurement of poverty. By dividing the number of sarongs in a household with number of dwellers, an index of less than one indicates extreme poverty.
The Poverty Line Income (PLI) for Malaysia was introduced back in 1977 using the Household Expenditure Survey. It was hardly changed ever since, even though the landscape of demography, economy and standard of living has undergone major changes.
For inclusive development to take place, there is a need to move from absolute and hard core poverty to relative poverty measurement. Absolute poverty is a condition where the gross monthly income of a household is insufficient to purchase a certain minimum necessities of life, as expressed by PLI. While hard core poverty occurs when the gross monthly income of a household is less than half of PLI.
In addition, relative poverty explains the income (PLI) disparity between groups. In Malaysia, it has been applied to address poverty issue among different income groups (e.g. M40, B40), ethnic groups or urban-rural dwellers.
In the past, poverty has been associated with communities in rural areas. In the case of Sarong Index for example, it helps to explain the links of poverty among rural Malay community with low productivity of rural produce and trade exploitation issues.
Nowadays, poverty comes with various factors such as urbanisation, inflation, disruptive innovation, unemployment and aging society issues. For a more effective policy outcome, poverty needs to be addressed holistically and not merely on income alone.
Apart from the development of poverty measurement at household level, there is also a need to work out the wellbeing measurement at national level. Focusing on income alone may result in a policy that emphasise more on Gross Domestic Product (GDP) and economic growth, rather than overall wellbeing.
The Malaysian Wellbeing Index in the mid-term review of RMK-11 highlighted that the economic wellbeing has increased faster than the social wellbeing. The alarming part is that family wellbeing was in decline even though income was increased during the same period.
Just like MPI is being adopted to complement the PLI in measuring poverty at household level, there is also a need to have an index to complement GDP at macro level. In this respect, the Genuine Progress Indicator (GPI), which has been applied by several developed countries can be a way forward for Malaysia.
Would the aim towards “enhancing inclusive development and wellbeing” encompasses the Muslims wellbeing completely?
Results indicate that income correlates negatively with spiritual and family wellbeing. Moreover, unpaid housework is the biggest positive contribution for economic welfare which was not reflected in GDP. Malaysia also has a significant waqf contribution that enhances the economic welfare under GPI components.
Henceforth, MPI and GPI are necessary complements of PLI and GDP for an inclusive development and wellbeing approach. Nonetheless, the adoption and refinement of the measurements with Islamic values are vital moving forward.