KRI noted that the national household income has been growing slightly faster (at 6.3 per cent annually from 1993 to 2016) than household expenditure (5.6 per cent per year since 1993). — AFP pic

KUALA LUMPUR, Oct 15 ― A household in Malaysia earning less than RM2,000 a month may have only RM76 left after deducting household expenses, research by the Khazanah Research Institute (KRI) has found.

KRI noted that the national household income has been growing slightly faster (at 6.3 per cent annually from 1993 to 2016) than household expenditure (5.6 per cent per year since 1993), showing statistics where the mean household income is RM6,958 and the mean household expenditure is RM4,033 as of 2016.

As for how much of a household's income is used on household expenses, KRI said it had gradually decreased from 68.1 per cent in 1993 to 54.4 per cent in 2009, before picking up to 58 per cent in 2016.

But KRI indicated that these national figures alone do not show the full picture of how well Malaysian households of different income categories were doing in real life, as the poorest Malaysian households were actually spending almost 95 per cent of what they earn for household expenses.

KRI pointed out the “worrying” situation of households earning below RM2,000 ― which falls in the bottom 40 per cent (B40) income group or the lowest 20 per cent in terms of income nationally, where their real residual income or remaining income after accounting for inflation is RM76 in 2016. This is down from RM124 in 2014.

“This highlights that households earning below RM2,000 are potentially very vulnerable against any economic shocks or emergencies,” the latest KRI report titled “The State of Households 2018: Different Realities” said.

In contrast, the richest households earning above RM15,000 monthly would have RM14,458 left over in 2014 and RM13,100 remaining in 2016, while households earning around the median household income of RM5,228 would have RM1,990 remaining in 2014 and a lower amount of RM1,811 remaining in 2016. (KRI noted however that the residual income does not include taxes and mandatory social security schemes, and said high income households would most likely be paying a bigger amount of residual income for taxes).

Real residual household income from 2014-2016. ― Screengrab from Khazanah Research Institute's The State of Households 2018: Different Realities report Malaysians spending more of their income for living expenses

All income groups experienced a drop of residual income after household expenses are paid for during the 2014-2016 period, which also matches the across-the-board increase in the proportion of household income being used for household expenditure.

For households earning below RM2,000, the proportion of household income used for household expenditure went up from 91.9 per cent in 2014 to 94.8 per cent in 2016, while those earning RM5,228 also saw their spending going up from 65.1 per cent (2014) to 67 per cent (2016) and those earning over RM15,000 similarly saw an increase from 41.9 per cent to 45 per cent.

The KRI research relied on the survey results by the Department of Statistics Malaysia (DOSM), whose website listed household consumption expenditure as including items such as food, housing, water, electricity, gas, transport, restaurants and hotels, communication, recreation services and culture.

Share of expenditure to household income from 2014-2016. ― Screengrab from Khazanah Research Institute's The State of Households 2018: Different Realities report When more doesn't mean more

In its analysis, KRI said the spending patterns of Malaysian households suggest the spending of those with lower-income are dictated by rising living costs, while the higher-income group gets to choose how they spend based on their lifestyle trends.

Although the lower-income group have been spending more, they have actually been getting less of what they pay for.

KRI observed that households earning less than RM5,000 consumed less food at home in 2016 when compared against 2014 despite spending more money on this, adding that this was not substituted by outside food as they also ate less outside. KRI said this matches the rise in prices for food either taken at home or outside.

While spending more on items such as housing, health and education, the lower-income group cut back spending on recreation and transport. And even when the overall price of transport fell during the 2014-2016 period, households earning below RM3,000 actually consumed less for transportation.

“Lower income households' spending on most items continue to grow except for recreation and cultural services, but actual quantity consumed in fact declined for many items, even overall food, given higher prices,” the KRI report said.

Unlike the lower-income group, households earning above RM5,000's reduced consumption of food at home was replaced with more eating out.

These households also consumed more recreation and cultural services, while the decline in petrol prices during the same 2014-2016 period meant that the higher-income group were consuming more in the transportation segment even when the actual money spent on it reduced.

“Higher income households' expenditure grew overall for most items, including recreation and cultural services, and on actual quantity, food consumed at home declined but is substituted for food away from home,” the report said.

“Is the changing pattern of Malaysian consumption in the last few years a reflection of the rising cost of living, or an outcome of shifts in lifestyle? The answer ― it seems ― is both, depending on whether you fall under the poorer or richer halves of Malaysian households,” the report concluded.