Budget planning: Those in the M40 group too are struggling to make ends meet. — FAIHAN GHANI/The Star
PETALING JAYA: The higher-income group or T20 has the money and the bottom 40 or B40 gets most of the government aid – now the middle-income group or M40, sandwiched between the other two, wants to see something for them in Budget 2024.
Having suffered “the middle child syndrome” for so long, they too are struggling to make ends meet amid rising prices and want to see programmes catering to them in the federal budget to be tabled in October.
The B40 is the 40% of households with a monthly net income of below RM4,850, the M40 is the 40% with a monthly net income of between RM4,851 and RM10,960, while the T20 are the 20% of Malaysian households with a monthly income above RM10,960.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the focus of the country’s annual budgets has always been on the B40 group, and less attention has been given to the M40.
“With the T20 doing well and B40 getting various assistance, those in the middle (M40) have been sandwiched, although the rise in the cost of living affects everyone, not just the B40.
“It is important to note that the lower the income group, the higher the tendency to spend, which means an effective solution must be in place to reduce this burden,” he said when contacted.
Mohd Afzanizam suggested the government get the M40 into cash transfer programmes instead of just the B40, saying such an initiative would help minimise the impact on their household income.
“Cash transfers will help M40 pay for their basic necessities. Cash transfers translate into more spending.
“Since the lower income brackets tend to spend more, having cash transfers will ensure there is still spending on their part, but at the same time, they won’t be too burdened.”
On top of that, Mohd Afzanizam said it was timely for Putrajaya to do a subsidy rationalisation exercise, adding that subsidies should only help the B40 and M40 instead of everyone regardless of income.
“Having a targeted subsidy will allow the government to help those who actually need it, and the extra money can be used for other purposes such as development.
“The current system where subsidies are given to all, for example the fuel subsidy, has benefited the high-income groups who typically drive luxury cars and as we know, these types of cars need more fuel.”
Malaysia Literacy in Financial Education Association founding chairman Amy Seok said the M40 often faces higher levels of income inequality with limited opportunities for upward social and economic mobility.
Since the M40 represents a significant portion of the population, Seok said the group needs to be financially stable and have enough disposable income to contribute to consumer spending and stimulate economic growth.
“A financially stable M40 group can invest in education and skills development, improving productivity and human capital. This, in turn, can contribute to economic growth and prosperity for the entire society.
“Helping the M40 group can provide a social safety net and cushion economic shocks. By ensuring this group has access to essential services and assistance during challenging times, we can enhance their overall well-being and protect them from falling into poverty.
“Helping the M40 group is essential for promoting social justice, economic growth, and a cohesive society. It can create a more equitable and inclusive society where everyone has equal opportunities to thrive,” she added.
Seok said stimulating entrepreneurship and supporting small businesses can also create opportunities for the M40 group to increase their income and achieve financial stability.
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She added that the government could allocate more resources towards providing financial support, training, and mentorship programmes to encourage entrepreneurship among the M40.
“Increasing healthcare funding, expanding the healthcare infrastructure, and improving healthcare services in public hospitals and clinics could promote the M40’s overall well-being.
“Affordable and adequate housing is a major concern for the group, especially in urban areas with high property prices,” she said, adding this could be addressed by increasing the budget allocation for affordable housing initiatives, such as subsidising housing loans or providing rental assistance.
Although the M40 has often been overlooked, the current government had in the revised Budget 2023 introduced a two-percentage-point cut in personal income taxes for those in the RM35,000 to RM100,000 taxable income band.
This was expected to increase the disposable income of an estimated 2.4 million taxpayers by up to RM1,300, said Prime Minister Datuk Seri Anwar Ibrahim during the tabling of the revised Budget 2023 on Feb 24.
On Friday, Deputy Finance Minister Steven Sim said the government would look into providing incentives for M40 under Budget 2024 to help them cope with the cost of living.
