• Who are the B40?
• Where are the B40 concentrated?
• How to Uplift the B40 in Perak?

The B40 is not unique to Malaysia alone, it is a global phenomenon and as such that, in 2014 the World Bank created a Shared Prosperity Indicator (SPI) to measure their income growth in each country. The B40 households refer to the group of people with the lowest 40 percent income calculated based on the income distribution of monthly average income.

In Malaysia as of 2014, any household that earns a monthly income below RM2,537 would fall into the B40 group. Recent data shows that 2.7 million of households fall into this category with 63% of them in rural areas as illustrated in Figure 1, while the remaining 37% are in the urban areas. They share several common characteristics such as, dependency on a single source of income (single breadwinner), working in low skilled jobs and lower value vocation. Those who are in urban areas mainly work as plant and machinery operators, or take up jobs related to carpentry, wholesale and retail trading. Meanwhile, those in the rural areas work in agriculture, forestry or fishing-related jobs.

Unlike poverty where efforts can be made and systems can be put in place to eradicate it, the B40 is much more complex, since there will always be a segment of the population that will earn the lowest income. The recommended strategy available right now is to increase their income so it reduces or eliminates the risk of them falling into poverty.

WHO ARE THE B40 IN PERAK?

In Perak, income has increased steadily for the B40 which covers various sectors of occupation, ranging from farmers, fisherman, small business operators, government servants as well as private sector workers.

Figure 2 shows the growth of the income groups in Perak from 2009 to 2014. There are 3 groups of households, the Top 20% (T20) represents
the top income group, the Middle 40% (M40) who are the middle-income households and the Bottom 40% (B40) that represent the lower income group. Each income group, represents a significant percentage of total households in the State.

In Perak, the average income level of the B40 has risen consistently, whereby this households income was only RM 1,155 then increase steadily to RM1,359 in 2012 and reach a new height of RM1,905 in 2014. This presents a cumulative annual growth rate of 10%. This can be attributed to among other things, government programs at the State and national level in cushioning the impact of rising cost of living.

Although income is rising, but if the gap between the T20 and the B40 is widening, this would suggest that inequality in terms of wealth distribution is worsening. What is the scenario of income gap in Perak, is it widening or narrowing?

Despite the rise in income among the B40, the gap with T20 has also widened during the period of 2009 to 2012. However, that trend has reversed in 2014 signifying that inequality in Perak is narrowing. In 2009, the income of the T20 is 5.85 times higher than the B40 and went up further to 6.17 in 2012. However, in 2014 the gap narrowed down to 4.86 indicating a smaller gap between the T20 and B40 households.

If the trend continues the State shall be able to reduce inequality creating a condition that is more inclusive.

WHO DOMINATES THE B40 IN PERAK?

Like Malaysia, Perak’s population also consist of various multi ethnic groups which form the fabric of its society. Which community or ethnic group dominates the composition of the B40 in Perak? In Figure 3 the B40 group is clearly dominated by Bumiputra where 52.2% of the households are in this income group, followed by 31.2% of Chinese and 17% Indian.

When compared among the 3 ethnic groups and their distribution in rural and urban, evidently most of the B40 Bumiputras are in the rural areas as shown in Figure 4. As for the urban areas there is an equal representation between Bumiputra (39%) and Chinese (39%), with the Indians making up the remaining 22% of the urban B40.

The B40 Bumiputra households also has almost an equal representation in both urban (50.4%) and rural (49.9%). The non-Bumiputra B40 households appears to be concentrated in the urban areas. While more than 80% of both Chinese and Indian B40 households are located in the urban area as illustrated in figure 5.

In other words for Perak, when it comes to lower income Bumiputra, it is more of rural-related issues whereas for Chinese and Indians, it is an urban problem. There is a need for an inclusive, wholesome and contextual approach in Perak to uplift the income of those who are in the B40 groups and focus must be given on those residing in rural areas.

PERAK MIDDLE CLASS ON THE RISE

Perak has made considerable progress in terms of lowering the percentage of low income households. It has managed to reduce the percentage of the low income households significantly in the period of just two years.

The State also has increased the number of middle income households as well as high income households as illustrated in Figure 6.

The Data in Table 1 shows income class for Malaysia households from the year 2012 to 2014. In the year 2012, Perak ranked third (3rd) highest number of households (56.2%) with income class below RM2,999, after Kelantan (64%) and Perlis (60.9%). These are the group of households which include the B40 group and households that is at risk of falling into the category. In 2014, the percentage of B40 groups in Perak drop to only 39.2%.

However, there is an increase in the income class range of RM3,000 to RM5,999, moving from 30.9% to 41.9% which recorded an 11% increase of the middle income group. In terms of the rate of increase, it is well above the rate of increase at the national level which is only 5.1%. Perak middle class is growing faster than the national level. The growth in the middle income households indicates that significant number of the B40 households have increased their earnings and graduated to the middle-income. This improvement can be attributed to various government programs such as the Micro Credit Scheme by Yayasan Bina Upaya (YBU) which solely aims to help those in the low-income (range).

Perak has to look at the current mechanism used to increase households income and evaluate whether it is effective in targeting the appropriate group.

The State need to reassess and refine the current mechanism of uplifting the low income group to target those in the rural areas. This is to ensure that whatever measures carried is inclusive by ensuring that it reaches the intended group. This requires the State to know exactly who they are and where they are at district level so they can be better targeted.

STEPS TO UPLIFT THE B40 IN PERAK

The State needs to re-evaluate the various measures undertaken to uplift income and improve on them so the most deserving target group will benefit. Here are some recommendations for the State:

1. The State should mobilise current existing mechanism at State and national level such as and national level such as Majlis Amanah Rakya MARA), to reach out and target deserving rural Bumiputra.

2. The State should conduct a poverty mapping within Perak, with the aim to better predict the effects of, and then evaluate current policies and programs designed to help deserving Bumiputra in the rural areas.

3. Evaluate and strengthen YBU existing programs strategically to convert the B40 as entrepreneur supported with constant mentoring and monitoring.

4. Implement a special program targeting the B40 group in rural areas using proven social business model to eradicate poverty and help lower income groups.

5. State should set up Innovation and Technology Centre in rural areas to help people increase their income through innovation.