PETALING JAYA: More Malaysians are moving to the city for economic opportunities, but most households are seeing slower income growth owing to the effects of the Covid-19 pandemic.
According to the Khazanah Research Institute, this has also caused a rise in absolute poverty, with urban households affected the most.
Its Households and the Pandemic 2019-2022: The State of Households 2024 (SoH 2024) report released Thursday (Sept 26) reported that in 2022, nearly 78% of households in the country were urban, up from 67% in 2002.
“Increase in urbanisation trends, driven by economic opportunities, correlates with state gross domestic product (GDP) per capita,” it said.
However, there was only moderate growth in household income as it was slowed by the pandemic.
“Household income grew at a much slower rate compared to the decade preceding the pandemic (2009-2019), dropping from 5.3% to 1%,” it said.
It said Selangor led household income growth, while urban areas like Putrajaya and Kuala Lumpur saw declines.
“From 2016 to 2019, all states except Sabah experienced positive real median household income growth.
“During 2019-2022, Putrajaya (-1.3%) and Kuala Lumpur (-2.5%) saw significant declines in real median household income,” it said
It added that Selangor outperformed other states with an average absolute increase of RM410 and a compound annual growth rate (CAGR) of 5.1%.
“Most states experienced declining growth in household income, with Selangor’s strong performance playing a significant role – without it, the national mean household income in 2022 would have been 12.9% lower.
“Districts in Selangor, except Klang and Petaling (-0.7% and 0.21% growth, respectively), were in the top percentile of CAGR growth in Malaysia.
“The highest growth districts in 2019-2022 were Kuala Langat (11%), Sepang (10%), and Ulu Langat (8%).
Additionally, it said growth in 2022 did not reach its full potential, leaving a 13% gap below pre-pandemic trends, highlighting a substantial lag in recovery.
“A third of districts in Malaysia saw their income growth fall into the bottom quintile (fifth) of the distribution, with many experiencing negative growth.
“Household income, when adjusted for inequality, grew more slowly, with 18 districts, primarily from Peninsular Malaysia, falling into the lowest growth group, resulting in decreased income and increased inequality,” it said.
This, the report said, had led to an increase in absolute poverty especially in urban households, with the highest household increases in absolute poverty in Kuala Lumpur (6,774 households), Kuala Muda (5,229), and Kota Kinabalu (5,117).
“While not all districts faced a rise in absolute poverty, urban households were the most affected with poverty rising from 3.8% in 2019 to 4.5% in 2022," it added.
The report noted that residual income struggles affected households in the lower income ranges, disproportionately affecting both lower- and middle-income households.
“This trend is further exacerbated through the Covid-19-related EPF withdrawal schemes, which collectively resulted in over 90% of EPF members under 30 not having enough in basic savings for retirement.
“Inadequate EPF savings raises concern about the retirement readiness of many Malaysians,” the report added.
