Question

In: Economics

1. Recommend two suggestions on how to narrow the gap of income between the M40 and...

1. Recommend two suggestions on how to narrow the gap of income between the M40 and B40 income groups in Malaysia (15 marks )
(300 words)

Solutions

Expert Solution

There's a large income disparity is better M40 and B40 in Malaysia. There is been a positive reports regarding the decline in the income inequality.
But these positive figures do not reflect the actual situation as there are reports that the bottom half of the Middle 40 per cent (M40) and Bottom 40 per cent (B40) are barely making ends meet and struggling to maintain a decent lifestyle.

Khazanah Research Institute’s (KRI) State of Households 2018 revealed a steady increase in the income gaps between the Top 20 per cent (T20), M40 and B40 groups since the 1970s.

These figures show that T20 households are gaining wealth at a faster rate compared with the rest.

Despite the improvement in mean household income figures, the gap between income groups continues to rise.

It is well documented that the escalating cost of living has put financial pressure on the M40 and B40 groups.

With income growing at a slower pace compared with the cost of living, the M40 and B40 groups are experiencing an abridged disposable income, which could be detrimental to future consumption, activity, emergency or debt services.


In the Malaysian Plan (2020-2024) we can include, targeted subsidies, cash handouts, healthcare benefits, education along with employment and entrepreneurship opportunities are the usual strategies to ease the burden of B40 households.

We need to formulate plans to close the income gaps between the T20, M20 and B60 groups.

The financial management capability and financial literacy of the B40 is hard to change.

The availability of disposable income encourages more spending instead of investment and wealth creation, the main principles of the T20 group.

It would be better to educate B40 households on financial literacy.

The introduction of financial management in schools is a good start.

Financial literacy should be given equal importance as language, science, mathematics and history.


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