Income Inequality in Malaysia: A Short Enquiry

My Mistake

When the article on tiered dividends was published earlier this year (https://www.dhirubhai.net/pulse/epf-tiered-dividends-closer-look-%E9%BB%84%E5%BF%85%E6%AD%A3-daniel-wong-6p-cfa-frm), I had concluded that the idea was not justified on its merits. In other words, it was not an optimal solution to the problem of wealth inequality. But I failed to ask myself if there was wealth inequality in the first place and to what extent, especially since it is oft-quoted as the justification for wealth redistribution policies, including progressive tax systems and tiered dividends.

So, I set out to find out more about the issue of wealth inequality. I posted two LinkedIn polls: one related to perception and the second related to real-world experiences. The first poll asked participants about their views on the wealth gap. The second poll asked participants about their salary growth rates. Here are the results:

Figure 1: Poll 1 Results

Figure 2: Poll 2 Results

Note: The participants in both polls may not be identical. Sampling bias exist as I only polled LinkedIn users.

What will strike you immediately is the disparity between perception and real-world experiences. 93% of participants thought that the wealth gap is increasing, although more than 50% of participants had, in reality, experienced moderate to high salary growth rates of at least 5%. The following table maps growth rates to ending salary as a multiple of beginning salary over a 30-year career:

Figure 3: Salary Growth and Ending Salary

The salary growth rates do not account for bonuses and allowances and also masks the fact that one’s earning potential increases according to a power law, e.g. exponentially. Most of your income will be earned in the dying years of your career. (This is why I have always emphasised on experience and skills rather than salary as a fresh graduate.) Therefore, if a participant of Poll 2 is young, the proclaimed annual salary growth rate to date is likely an underestimation of the actual growth rate over his/her entire career.

I also do not doubt that some (or even most) participants would consider themselves to be in the higher strata of society in terms of earning ability. I concede that point. As such, the polls and the table above do not conclusively prove that the widening wealth gap is merely a perception, rather than a reality. But for those of you who consider yourselves to be in the lower categories in terms of earning ability and yet indicated a moderate or high salary growth rate, you may have realised by now that something is amiss. More on that later.

The Khazanah Research Institute, one of Malaysia’s leading think tanks, published in 2018 a report on Malaysian households titled ‘The State of Households: Different Realities’ (“KRI Household Report 2018”). The report was led by Allen Ng, now chief economist at the Securities Commission. His team came to some definitive conclusions about income inequality:

“Although official estimates show that inequality has been decreasing, the public are not sympathetic to this notion. Public discussion often revolves around how inequality is still a pervasive problem which has not improved in the past few decades. The general perception is that the rich are getting richer, while the poor are getting poorer.”

Whatever the conclusion was, whether inequality was increasing or decreasing, it was derived based on a flawed analytical approach, one that is commonly committed across the board by journalists, economists, researchers, policy makers, politicians, institutions, etc, as we shall examine in due course.

Income “Gap” versus “Inequality”

First and foremost, a few housekeeping matters. A “gap” is a difference in numerical terms. If B40 mean income is RM3,152 while T20 mean income is RM18,506, there is an income gap of RM15,354.

An “inequality” on the other hand connotes unfairness. The Oxford Dictionary defines equality as “the state of being equal, especially in status, rights, or opportunities.” Inequality is defined as the lack of equality.

An expression about income gap is an observation, an expression about income inequality is a judgment. Income gaps do not readily translate into income inequalities, i.e. problems that should be fixed, as we shall see.

Wealth vs Income

“Wealth” and “income” mean very different things, although they are often used interchangeably. “Wealth” measures accumulated assets, while “income” measures periodic contributions to accumulated assets. In finance parlance, it is the difference between a balance sheet and top-line revenue. It is not hard, for instance, to imagine someone wealthy who has low levels of income, and vice versa. This is not to say that income and wealth do not share an intimate relationship. Someone who is wealthy can enhance her income-generating capabilities.

As data is more readily available for income as compared to wealth, this article focuses on the income inequality, rather than the wealth inequality.

The “Gap”

When we speak of an income “gap”, we could be speaking of the top-10% versus bottom-10% gap, the urban-rural gap, ethnicity gap, individual or household gap, or various other gaps. In this article, we refer generally to the top-X%-to-bottom-Y% individual income gap. Household income, on the other hand, can be problematic as the number of income earners within each household can vary significantly, compounding the already difficult task of analysing the income gap. In any event, none of these limitations significantly affect the main points put forth in this article.

Caveat

This article is not meant to be a comprehensive or conclusive guide on the issue of income inequality in Malaysia. My goal is to highlight certain pitfalls when analysing this contentious subject. In short, the focus is purely on the analytical approach, not the conclusions per se.

Statistical Data and Analysis

Based on the Department of Statistics Malaysia’s Household Income & Basic Amenities Survey Report 2019 (“HIS & BA 2019”), I extracted the following data:

Figure 4: Mean of monthly household gross income of household group by ethnic group of head of household and strata, Malaysia, 1970 - 2019

Note: * Refers to Peninsular Malaysia only. ** Starting 1989, data is based on Malaysian citizens.

I thought that the KRI Household Report 2018 summarised the (older) data succinctly when it stated that “household income of the top 20% as a multiple of bottom 40% household income has significantly decreased from 1970 to 2016. Similarly, it has decreased as a multiple of middle 40% income. Middle 40% income as a multiple of bottom 40% income has also decreased. However, the absolute gap between all three income groups have increased, the gap between the top 20% and bottom 40% is particularly striking, and this could the reason for resentment and the negative perception of inequality.” [Emphasis added.]

For instance, in 1970, the top 20%-to-bottom 40% mean household gross income multiple was RM735/RM76 = 9.67 times, whereas the multiple in 2019 was RM18,506/RM3,152 = 5.87 times. The absolute differences were RM659 and RM15,354 respectively; the absolute gap had widened by more than 20 times.

The KRI Household Report 2018 then said:

“We would need to ask ourselves which measure matters more. To policymakers and economists, looking at relative measures is important to compare how much a parameter has changed relative to a reference point. Researchers can observe whether certain redistributive policies are effective based on whether inequality has declined over time. Sometimes, relative measures are important to ordinary households too when comparing how much their conditions have changed relative to a reference year. However, absolute measures are a lot more obvious and easier to compute. Households would scarcely find out how much their income as a percentage of top 20% household income has changed over time. They are likely more interested in the difference between their income and the income of another household. The existence of falling inequality is not enough to reassure the public since inequality, nonetheless, still exists.” [Emphasis added.]

The KRI Household Report 2018 concluded unequivocally that income inequality between households was falling but still existed. It did not realise that even in an ideal society, income gaps could still exist and be widening over time if one analyses statistical categories (e.g. T20, M40, B40) rather than individuals.

The Analytical Flaw

In relation to income inequality, it is not merely a matter of perception or relative versus absolute measures as KRI asserts. The entire approach of comparing statistical categories (e.g. T20, M40, B40) over time based on time series data is flawed. It fails to account for the movement of individuals between the statistical categories over time. In other words, the statistical categories are not comparable over time as the composition of those categories may have altered significantly or completely between two points in time. Any “trend” that is identified would then, at best, be uninformative or misleading in the worst-case scenario.

The statistical categories are not comparable over time as the composition of those categories may have altered significantly or completely between two points in time.

What we perceive as an income gap based on analyses of statistical categories does not rule out the possibility that an individual started her career in 1970 as someone in B40 and eventually worked her way up to T20 in 2019. Let us not forget that many of the rich also become poor. Someone who might be in T20 could fall down to M40 or B40 over the course of her life. One might be comparing totally different batches of people across time and attributing qualities to statistical categories that are mismatched or irrelevant to the real-life experiences of actual individuals.

This analytical trap is so easy to fall into because we all reasonably assume that there is income inequality in society. I agree that there is likely income inequality to some degree, even though I claim that it is not sufficiently proven based on the analytical approach taken. With this reasonable assumption of income inequality in mind and using statistical trends as proxies of income inequality, we reach certain conclusions about the narrowing or widening of that inequality. But this can be very misleading. The “inequality” can widen when looking at broad statistical trends without the actual problem getting worse.

Let me provide a few hypothetical examples. A younger population entering the workforce due to a population boom might cause the mean income for B40 to decrease or increase less than T20. Or the income gap could widen as salary growth rates accelerate, lengthening the income range from B40 all the way up to T20. It could also widen due to globalisation. As the world becomes increasingly interconnected, it becomes increasingly a “winner takes all” world; everyone is still better off today compared to yesterday due to technological advances, but a few become exceedingly rich and pull ahead, distorting the mean. Therefore, when analysing the B40-T20 mean income gap, it might seem as if inequality is widening, but it could be due to demography, accelerating salary growth rates, globalisation, or various other factors. The key point is: we need to know the details. We cannot jump to premature conclusions merely by looking at the B40-T20 mean income gap.

The key point is: we need to know the details. We cannot jump to premature conclusions merely by looking at the B40-T20 mean income gap.

What matters more when analysing income inequality is the earning mobility of an individual as determined by economic processes and other factors. Understanding the underlying factors that cause differing income growths is so much more crucial than merely looking at the outcome, i.e. income. Turnover of constituents of statistical categories over time is more informative than trends of statistical categories over time. In short, we should be analysing the impact of underlying factors on individuals, not outcomes as represented by statistical categories. The statistical categories and their characteristics (e.g. mean, range, median) may just as well remain static forever and we would still be none the wiser as to whether there is income inequality or not, let alone whether it is narrowing or widening, if we are not tracking individuals over time. Even in a perfectly fair society where everyone starts at B40 and ends at T20, there would still be B40, M40 and T20 as statistical categories over time.

In short, we should be analysing the impact of underlying factors on individuals, not outcomes as represented by statistical categories. . . . Even in a perfectly fair society where everyone starts at B40 and ends at T20, there would still be B40, M40 and T20 as statistical categories over time.

To be clear, I am not saying that income inequality does not exist. I am saying that it is not sufficiently proven based on the data and the way the data is being sliced and diced for analyses.

The Preliminary Right Approach: One Step Better

The appropriate analytical approach to the issue of inequality is simple: track and analyse individual lives, not statistical categories that lack the granular history of actual individuals in the categories. For example, we could analyse the tax returns of individuals to ascertain her salary growth over time; the tax authorities would have the data. This is similar to the second poll that you might have participated in.

The right approach can be tedious, but tediousness does not justify taking an approach that severely misestimates the income inequality of a population that then leads to policies that overestimate the severity of the issue. Note that I have not left much room for underestimation of the issue because in my mind the actual problem can hardly be worse than the flawed analytical approach that has been adopted. When we analyse statistical categories over time, individuals are treated as abstracts and we ignore truly informative details. As mentioned earlier, even in an ideal society where everyone starts at B40 and ends at T20, you will still have B40, M40 and T20 as statistical categories over time.

The right approach may also be simple, perhaps by including an additional question in the HIS & BA survey about income growth. Individual income growth rate in itself captures trends at the level of individuals, as opposed to trends at the level of broad statistical categories.

The KRI Household Report 2018 highlighted the “significance of having access to more granular level statistics and to have the right socio-economic indicators that could adequately reflect the richness of the warp and weft of economic realities. [DOSM] and many other official agencies have begun to make important and earnest efforts in recent years towards this end.” I am not sure if this means more data that are grouped into uninformative statistical categories or those that actually strike at the heart of the issue. We need to stop treating B40 as an abstract group but as individuals with vastly different trajectories.

The Comprehensive Right Approach

Even if analyses of individual income growth rates demonstrate significant disparities between different groups, we should not automatically assume that there is income inequality (as defined earlier as an injustice or unfairness). We should not be hasty in embarking on wealth redistribution policies without considering other factors that may have led to the outcome. Income or wealth is the by-product of a long list of economic processes and other factors. To talk of income or wealth without considering income- or wealth-generating economic processes and other factors is putting the cart before the horse.

Income or wealth is the by-product of a long list of economic processes and other factors. . . . Income or wealth is not something that just magically appears to be distributed or redistributed.

Income or wealth is the output based on a person’s skills, intellect, socioeconomic background, educational background, experience, life and career choices, attitude, culture, diligence, nation’s economic, political and judicial environment, ethnic history, luck (one factor many people forget), exposure to discrimination, etc. Income or wealth is not something that just magically appears to be distributed or redistributed.

All these factors can be grouped into external and internal factors, factors outside or within the control of individuals. Some factors such as the family one is born into and its socioeconomic background are obviously fated (“takdir” or “rezeki” as one often hears in Malaysia). Some factors such as professional attitude and life choices are factors well within one’s control.

Figure 5: Na?ve Illustration of Individuals Moving Across Statistical Categories Over Time

In the diagram above, persons 1 and 2 made some personal career choices that shifted them from T20 to B40 after 11 years. Persons 7 and 8 made different career choices that shifted them from B40 to T20 over the same period. Would it be of any relevance to any of them or to policy makers if you had told them that the B40-T20 income gap had increased in absolute terms from RM9,000 to RM17,000 and in relative terms from 10 times to roughly 7 times? They made personal career choices that determined where they ended up eventually. It was not some unfair external factors that placed them there. More on abject poverty later.

The KRI Household Report 2018’s version of “I don’t know” was stated as such: “A firm understanding of the reasons underpinning the diversity in household incomes is essential in appreciating the actual state of households—and more broadly, the overall state of the Malaysian economy. A comprehensive and definitive treatment on this matter, however, is complex and is beyond the scope of this part of the report.” In the report’s conclusion, it stated, “To fully appreciate the state of households in Malaysia, there is a need to look beyond conventional, high-level economic indicators that could mask the experiences of Malaysians living in different economic realities. . . . the different economic challenges faced by Malaysians from lower income households that otherwise would not have been able to be discerned by looking at national averages.” [Emphasis added.]

Presumably, acknowledging the complexity of the issue and sidestepping a more comprehensive analytical approach is licence for the researchers to reach unfounded conclusions nonetheless. The KRI Household Report 2018 concluded that “The fact that even when the statistics on income inequality is improving, the absolute gap between income groups . . . are continuing to rise.” [Emphasis added.] As an observation of statistical categories, the latter part about the absolute gap is accurate. But does an increasing income gap based on analyses of statistical categories automatically makes income inequality a fact? It does not. Is an increasing income gap a signal to look deeper into the details? Yes. But definitely not to reach sweeping conclusions about inequality.

Is an increasing income gap a signal to look deeper into the details? Yes. But definitely not to reach sweeping conclusions about inequality.

Nonetheless, the KRI Household Report 2018 did analyse some of the factors that might contribute to an income gap. On the topic of education and skills, it stated, “In economics, human capital is a measure of the skills, education, capacity and attributes of individuals which influence their productive capacity and earning potential. It is also one of the most important determinants of overall economic outcomes for both households and the overall economy. As such, it is likely that the large variation in household income could be explained by the differences in human capital for each household—measured, albeit indirectly, through their education and occupational skill-levels.” [Emphasis added.] I agree. We need more of these kinds of analyses to inform us as to what increases income- or wealth-generating capabilities, not facile analyses of statistical categories.

Implications

The implications may be a bitter pill to swallow. You bear responsibility for internal factors. To the extent that you are not diligent, do not seek self-improvement, do not pursue knowledge, you do not deserve higher income growth. Conversely, anyone who acquires the necessary skills to meet the demands of the workforce should be able to climb up the income ladder. A participant of the economy must be allowed to climb up or fall down the ladder in accordance with the natural operation of a free market. There should be no artificial ceiling or floor to one’s earning potential.

Which leaves us with external factors. Certain external factors like discrimination should be eradicated (although, even then, I have mild reservations; different topic for a different time). To the extent that society can eradicate discrimination and other external factors that unfairly impinge on a free citizen’s ability to increase income growth in competition with others, it should. Society should bear the cost and burden of doing so and enforcing it.

However, there are certain external factors that, though is not the individual’s fault, is also neither society’s fault. For example, your family’s socioeconomic background may hinder your ability to fully pursue certain opportunities due to a lack of wealth. This may in turn limit your career development and so on and so forth. Society and its institutions should not be expected to solve or make right such factors.

There are certain external factors that, though is not the individual’s fault, is also neither society’s fault.

The Harm

The B40-T20 mean income gap or any other metric that merely focuses on the outcome, rather than the underlying factors, is not sufficiently informative to allow us to draw conclusions on the issue of income inequality.

The B40-T20 mean income gap or any other metric that merely focuses on the outcome, rather than the underlying factors, is not sufficiently informative to allow us to draw conclusions on the issue of income inequality. However, based on the widening income gap and a lack of distinction between the various underlying factors that cause it, income inequality is automatically perceived to be worsening. Politicians, policy makers and institutions (“ruling class”) then dish out policies ranging from BR1M (financial assistance to B40) to tax incentives to myriad others. When BR1M was in vogue, remember hearing about that relative of yours who just started working who also qualified for financial aid as B40? The one who is now high income.

Imagine sitting in a room with your boss.

Let me illustrate how ridiculous this can be in a different way, a way that you can immediately relate to. Imagine sitting in a room with your boss. Your boss earns RM50,000 a month while you earn a “meagre” RM3,000. The following conversation takes place:

You: Give me RM10,000 of your salary each month.

Boss: Why?

You: I earn so much less than you.

Boss: So?

You: Shouldn’t we balance out the inequality?

Boss: How many years have you been working?

You: Three.

Boss: I have worked twenty. How many professional courses have you taken?

You: None.

Boss: I have three professional qualifications.

You: What’s your point?

Boss: How many kids do you have?

You: None. But maybe two in the future.

Boss: I gave up kids to focus on my career.

You: I don’t get it.

Boss: Talk to me in twenty years.

You immediately get the point when we speak of individuals, not statistical categories. But when we speak of statistical categories, all the relevant details get washed out. The boss is in the T20 category and the fictional “you” is in the B40 category. Wealth redistribution is the fictional “you” in the above scenario getting your way en masse. I am exaggerating, but you get the point. “Fixing” income inequality without regard to particular details of individuals in fact leads to gross injustice for the boss and sets the wrong example for the fictional “you”, as in my example. It may not lead to equality or justice as we all assume it would. Of course, there are the less fortunate who really do deserve our assistance, but each case should be assessed on its merits.

“Fixing” income inequality without regard to particular details of individuals in fact leads to gross injustice. . . It may not lead to equality or justice as we all assume it would.

There is a tendency for the ruling class to try to right every wrong, to force equality even if the “inequality” was caused by internal factors or factors that are neither the individual nor society’s fault. It is unfair, but the fault cannot be assigned to anyone, except God. As the adage goes, “Life is unfair.” This tendency for the ruling class to assist those who are undeserving, purely because their bottom line looks bad, without any consideration of merits and personal choices that led to lower income, must stop. Presumably, everybody deserves to have the same quality of life and income regardless of internal factors and pure unlucky external factors. There is also this tendency to assume that one’s economic prosperity is another’s loss, without any regard for the economic pie getting bigger (which it invariably does according to human’s limitless desires). The wealth-generating capabilities of the wealthy add to the nation’s overall prosperity. Savings in the bank are lent to facilitate economic processes such as investments and borrowings.

Now, one might argue that if the government were to conduct a thorough assessment of each individual before providing financial aid, the welfare machinery would break down. I agree. But sweeping wealth redistribution policies are also not the solution. The government should focus more on identifying abject poverty, those who cannot climb out of less fortunate circumstances no matter how hard they try. Help these people because they deserve it based on merits. Government should then spend the rest of its time ensuring that national infrastructures and economic processes are well established and judicially protected to empower any of its citizens who are willing and able to seize the opportunities available at her disposal to raise income growth. The rest is up to individuals and competition. Do not give in to a sense of helplessness that the ruling class is eager to have you believe in order to increase your reliance on them. Make your own fate. After all, our personal experiences generally tell us that our salaries do increase over time.

What we do not need is superficial analyses of statistical categories to fuel resentment and spawn misguided policies. What we need is detailed analyses of underlying factors that determine migration of individuals between statistical categories, factors that inform us of income- and wealth-generating capabilities, lest we miss the true trends about our nation’s economic health. Ultimately, what we need is equality of economic processes, not necessarily equality of outcomes.

Ultimately, what we need is equality of economic processes, not necessarily equality of outcomes.

I digress to share a true story. When I pressed one of my colleagues for evidence of income inequality, she was somewhat taken by surprise because income inequality is one of those facts of life we all assume to be incontrovertible but one that we never really fully investigate ourselves. Income inequality is repeated like a broken record by the media and the ruling class. She simply said, “I see poor people on the streets.”

Crafting national policies based on hunches, assumptions and flawed analyses is not the way forward. In fact, it might be less harmful to say that you do not have sufficient knowledge to make any conclusions about income inequality than to make sweeping, unfounded conclusions. It is better to say “I don’t know.”

She simply said, “I see poor people on the streets.”

Tiered Dividends

Institutions like EPF merely convey the outcomes of established economic processes. If there is income inequality, EPF did not cause it.

Institutions like EPF merely convey the outcomes of established economic processes. If there is income inequality, EPF did not cause it. Whatever caused income inequality happened due to various underlying factors far removed from EPF and may even be due to factors in the distant past. EPF in the present need not feel pressured by society, the media and politicians to “fix” the problem, especially when we have not even established that there is a problem in the first place.

To justify tiered dividends is akin to asking a bank to withdraw money from an account of someone richer to deposit into yours. EPF is not endowed with a social mission, to enforce social justice (or rather social injustice, as I demonstrated earlier). It is a slippery slope that leaves its mandate open to various subjective interpretations as there are countless other “injustices” other than income inequality around us. As Thomas Sowell stated in his book Intellectuals and Society:

“[A] cosmic [or divine] injustice is not a social injustice, and proceeding as if society has both the omniscience and the omnipotence to “solve” the “problem” risks anti-social justice, in which others are jeopardized or sacrificed, in hopes of putting some particular segment of the population where they would be “but for” being born into adverse circumstances that they did not choose.”

EPF’s mandate is clear and simple: to maximise retirement savings for members. It is not to deliver judgments and override the various factors, including personal choices, that played a voluntary or involuntary role in the collective outcome that is an income gap. If the free market decides that a nurse should be paid RM3,000 a month and an engineer RM10,000 a month, I see no basis for EPF to override market factors and take some of the dividends due to the engineer and give it to the nurse (as noble as her profession is), let alone all the other professions EPF would indirect be making a pronouncement on.

Some might even argue that when we sprinkle goodness across the board regardless of merits, the deserving would inevitable receive some of that goodness and we would have alleviated their less fortunate circumstances. If that is the case, it has to be proven on a net basis, that the benefits to the less fortunate significantly outweigh the benefits to undeserving recipients. Often times, we make policies that sound and look good with no subsequent assessment of the impact of those decisions. So much for “intellectuals”. (I may explore the adverse impact of minimum wage legislation in another article. Let me know in the Comment section below if you would like that.)

Often times, we make policies that sound and look good with no subsequent assessment of the impact of those decisions.

Real Solution to Income “Inequality”

This is the simplest part of the article. To increase your personal income growth, acquire skills that are in demand, skills that the T20 have. Pure and simple. That may require you to make personal sacrifices and absorb the culture of high-income earners, among others. But if that is what you what you really want, you have to pay the price. Stop resenting the rich and start emulating them. There is a reason why numerous people voluntarily give money to the rich: they offer products and services that are in demand.

Be in demand and stop demanding.

The Role of Media and “Social” Media

The media have contributed to the pervasive perception of income inequality, fuelling resentment and pressuring politicians and institutions to fix it. Here are some recent examples of the same analytical flaw of analysing statistical categories rather than analysing individuals:

1.    Malay Mail, 10 July 2020, ‘Income inequality in Malaysia widened even while median household income rose to RM5,873 in 2019, according to latest statistics’. (https://www.malaymail.com/news/malaysia/2020/07/10/income-inequality-in-malaysia-widened-even-while-median-household-income-ro/1883232)

2.    The Edge, 12 August 2020, ‘A closer look at the latest data on ethnic income gap’. (https://www.theedgemarkets.com/article/closer-look-latest-data-ethnic-income-gap). Note: Written by the same journalist who wrote about tiered dividends, Cindy Yeap.

3.    LSE Blog, 11 September 2019, ‘Income inequality among different ethnic groups: the case of Malaysia’. It stated, “In conclusion, the decrease in income inequality in Malaysia was mainly driven by two opposite trends: a sharp decrease in Chinese income shares in the top and a substantial increase in Bumiputera income shares in the top and bottom.” It treated ethnic groups as homogenous blobs. While one cannot migrate across ethnic groupings as one might migrate across statistical categories such as B40, M40 and T20, it committed the same critical flaw of treating the top 10% or 1% within ethnic groups as static statistical categories rather than individuals that can and do migrate between categories. For instance, it stated, “In particular, in the top 10 per cent, the average growth rate per adult national income for Bumiputera is 5.4 per cent, compared to 1.2 per cent for Chinese and 4.6 per cent for Indians.” (https://blogs.lse.ac.uk/businessreview/2019/09/11/income-inequality-among-different-ethnic-groups-the-case-of-malaysia/, https://wid.world/document/wid_issue_brief_2019_9-pdf/) One of the author is described as “the economic adviser to the Prime Minister of Malaysia. Prior to this appointment, he led the Council of Eminent Persons’ (CEP) secretariat. The council advises the government on economic and financial issues. He has served as a consultant for the World Bank, the United Nations Development Program (UNDP), the United Nations Children’s Fund, and the United Nations Economic and Social Commission for Asia and the Pacific.”

Social media may also have fomented resentment of the rich who are now much more visible on platforms such as Instagram.

Conclusion

What matters more than equal outcomes is equal opportunities. And while an equal-opportunity world is an unreachable ideal in part due to external factors that is nobody’s fault, we need to continue protecting and improving on underlying systemic processes — economic, political and judicial — that empower willing individuals to improve their livelihoods. Malaysia is a land full of opportunities. I also believe that there is no age more equal than the present, for the internet is the great equaliser; all the knowledge is at one’s fingertips.

Analyses of statistical categories hinder our ability to recognise the opportunities available to us and stalls our progress as we are frozen in helplessness and preoccupied with resentment due to the pervasiveness of the impression of income inequality. At the risk of repeating myself, I am not saying that income inequality does not exist. I am merely saying that the jury is still out.

Ultimately, does income inequality matter even if it exists? We have much more prosperous lives than one generation ago, let alone two. While a high-income nation is defined relative to peers, happiness is defined personally and it resides inside each one of you. Be contented and be happy, whatever your income is. Happiness is the end-goal in life.

Postscript

I like writing articles to crystalise thoughts. As always, I am open to changing my mind. Let me know what you think in the Comment section below.

Credit: Thomas Sowell, Intellectuals and Society, 2009. For a more comprehensive treatment of income inequality and wealth redistribution, please read this book. Although expressions in the article are mine, the main ideas and concepts were drawn from this book. All errors are mine alone.

Other useful links:

1.    HIS & BA 2019, DOSM (https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=120&bul_id=TU00TmRhQ1N5TUxHVWN0T2VjbXJYZz09&menu_id=amVoWU54UTl0a21NWmdhMjFMMWcyZz09)

2.    KRI Household Report 2018 (https://www.krinstitute.org/Publications-@-The_State_of_Households_2018_-_Different_Realities.aspx)