Economic Report 2021/2022: Pandemic cut per capita income by 6.5%, relegated households to lower-income brackets

KUALA LUMPUR (Oct 29): Covid-19 has had a scarring impact on incomes, giving rise to the emergence of new vulnerable groups while compounding existing issues of under-underemployment and youth unemployment in the nation, the Ministry of Finance (MoF) said.

Citing Department of Statistics data, MoF said per capita income in 2020 shrank 6.5% to RM43,475 from RM46,450 in 2019.

Mean salaries and wages declined 9% to RM2,933 from RM3,224 in 2019, relegating many households’ incomes in the middle 40% (M40) category to bottom 40% (B40).

The 5.6% contraction in economic growth in 2020 led to the number of unemployed persons increasing by 39.9% to 711,000 in 2020 from 508,200 in 2019, the statistics department data showed.

The pandemic also saw an increase in youth unemployment to 12% of the total youth labour force or 314,000 persons in 2020 from 295,800 in 2019 (10.5%), and the doubling of underemployment to 334,000 persons or 2.2% of the total employed persons from 191,600 (1.3%) year-on-year.

MoF, in its Budget 2022 economic outlook report, attributed the employment issue to the market’s inability to meet the increasing demand of jobseekers, namely new graduates and those retrenched during the pandemic.

“This has compounded the existing issue of existing inflexible working arrangements which have discouraged more women from participating in economic activities, while over-reliance on migrant workers, particularly low-skilled foreign workers, as well as unattractive wages have hindered Malaysians’ involvement in certain occupations,” the ministry said.

(MoF did not provide details such as the sample size of its survey for the youth unemployment and underemployment figures in its report. Under-employment refers to workers being employed in less than full-time or regular jobs or insufficient positions for their training and economic needs.) 

MoF observed that although the government’s aid packages kept the current unemployment rate below 5%, concerns about the pandemic’s longer-term impact on lives and livelihoods prevail.

It is worth noting that while the government reduced its fiscal deficit from 6.7% of gross domestic product (GDP) in 2009 to 3.4% in 2019, the pandemic’s call for aid and stimulus packages led to the fiscal deficit near doubling to 6.2% of GDP in 2020. Since the emergence of the pandemic in March 2020, Putrajaya announced eight assistance packages totalling RM530 billion for businesses and society to weather the crisis.

MoF pointed out that in the medium term, the government will gradually consolidate its deficit by optimising revenue, which will necessitate the implementation of a “fair and effective taxation system”, and rationalising expenditures requiring a relook at the structure of governmental expenditures.

According to the Household Income Estimates and Incidence of Poverty 2020 Report (2021), 12.8% of top 20% (T20) and 20% of middle 40% (M40) households have now been relegated to a lower-income category.

“In particular, the M1 (lowest 10 percentile of the M40) — compared to the bottom 40% (B40) group — was more severely impacted during the pandemic due to their high financial commitments and household expenses.

“Data indicates that around 600,000 to one million M40 households have been relegated into the B40 income bracket,” said MoF.

“The pandemic has also spurred a significant shift to work-from-home and remote (work) practices, which require considerable digital skills and technological adoption.

“On the other hand, the lack of social security protection for certain segments of workers, particularly the self-employed as well as informal sector, has increased their vulnerability.

“As of June 2021, the Social Security Organisation highlights that only 6.5% of the 2.5 self-employed were registered under the Self-Employment Social Security Act 2017 (Act 789), which shows the severity of the situation,” MoF said.

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