Disposable-income model could lead to broader eligibility for fiscal aid: Academic
PETALING JAYA: Experts support the notion of a shift from Malaysia’s income classification of B40 (bottom 40%), M40 (middle 40%) and T20 (top 20%) categorisation to a disposable income model which could provide a more accurate picture of household financial pressure.
However, they say data integrity and feasibility remain its key challenges.
Socio-Economic Research Centre executive director Lee Heng Guie said the proposal previously raised by then Economy minister Datuk Seri Rafizi Ramli in June 2023 was a sound policy idea that could improve subsidy targeting.
“I think the initiative better reflects (how) individuals should be categorised and helps the government target subsidies more effectively, especially for assistance such as RON95 fuel subsidies and the Rahmah Cash Contribution.
“Sometimes an M40 individual (could have) many commitments to cover and fall into the B40 category after accounting for net spending and what is left from their income.
“At the same time, a B40 individual may live comfortably because of lower commitments and spending habits,” he told theSun.
However, he added that discussion about the policy slowed following Rafizi’s resignation.
He also said the Central Database Hub, introduced in 2024, was expected to support such classifications.
“Before he resigned, there was an announcement about a (second phase) of the (database hub). If the initiative is to proceed, it should be based on past household income research, particularly those by Khazanah.”
Putra Business School MBA and DBA director Prof Dr Ahmed Razman Abdul Latiff said a shift to disposable income classification could lead to broader eligibility for fiscal assistance.
“There is a possibility that the government would allocate more fiscal aid to certain groups because segments of the M40 may not have disposable income due to factors such as (more) household dependants, urban living and high debt burdens.”
On implementation, he said financial commitments are more complex to obtain.
“Salary information could be obtained from the Employees Provident Fund (EPF) and Inland Revenue Board, but financial commitments require data from various institutions, including banks and insurance companies,” he said, adding that the database hub could be used to centralise updated financial disclosures.
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said disposable income provides a fairer reflection of living conditions as it accounts for realistic household obligations.
He also said such findings could attribute to a more practical review of graduate starting salaries and wage policies, but cautioned that any adjustments must be carefully calibrated to avoid excessive pressure on employers.
“On findings that single individuals aged 25 to 30 earning between RM3,000 and RM4,000 lose nearly half of their income to monthly commitments, there is an economic basis for the government to reassess graduate starting salaries.
“While the minimum wage cannot be raised abruptly without affecting business operating costs, the government could consider graduate pay policies that are better aligned with the cost of living in major urban centres.
“Measures such as hiring incentives, tax credits for employers and industry-based upskilling programmes could help raise graduates’ effective wages without placing excessive pressure on businesses.”
Williams Business Consultancy director Prof Geoffrey Williams was more cautious, saying true disposable income is difficult to measure.
“A clearer and more practical measure would be net income after statutory deductions such as EPF and income tax, which is already collected by the Inland Revenue Board, but only for those in formal employment.
“(Another) simpler approach would be to use a reverse income tax, in which those earning below a threshold such as the median wage would receive a tax credit, or a monthly assistance for those who are not employed.”
